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Problem 5-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis: Cost Structure [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6) Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below Sales (13,000 units X $30 per unit) $ 390,000 Variable expenses 195.000 Contribution margin 195,000 Fixed expenses 227,500 Net operating loss $(22,500) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $89,000 per month. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,500 units)? Answer is not complete. Complete this question by entering your answers in the tabs below. no Ren 4 Reg 5A Req 5B Req 5C be and dollar Sales. 2. The president believes that a $6,800 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $89,000 per month. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,500 units)? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg SA Req 5B Reg 5C Compute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do not round Intermediate calculations. Round "CM ratio" to the nearest whole percentage (1.e., 0.234 should be entered as "23"). CM ratio Break-even point in unit sales 50% 14,500 435,000 S Break-even point in dollar sales RO Reg 2 > $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revis reduction in the selling price, combined with income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer bam sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many to be sold each month to attain a target profit of $4,200? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, would increase by $52,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income sta assuming that operations are not automated and one assuming that they are. (Show data on a per unit and perce well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 5B Reg 1 Req 2 Reg 4 Reg 5A Req 5C Req3 The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort b sales staff, will increase unit sales and the total sales by $89,000 per month. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? (Do not round intermediate calculations.) Increases by $ 37,700 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $89,000 per month. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,500 units)? Answer is not complete. Complete this question by entering your answers in the tabs below. Req 4 Reg 5B Reg 2 Reg SA Req 5C Reg 1 Reg 3 Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? (Losses should be entered as a negative value.) Revised net operating income (loss) $ 4,423,500 yol did. He sales uction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,500 units)? Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4 Req 5A Reg 5B Req 5C Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200? (Do not round intermediate calculations. Round final answer to the nearest whole unit.) Show less Unit sales to attain target profit Prey 2 of 3 Ney to be sold each month to attain a target profit of $4,200? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixe would increase by $52,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income stater assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percenta well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Reg 4 Req 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce riable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month. Compute the new CM ratio and the new break-even point in unit sales a dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should entered as "23") and other answers to the nearest whole number.) Show less % CM ratio Break-even point in unit sales Break-even point in dollar sales c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,500 uni Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req3 Req 4 Reg SA Reg 58 Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $52,000 each month. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole number.) Show less PEM, Incorporated Contribution Income Statement Not Automated Per Total % Unit Automated Per Unit Total % 0 $ 0 0 0 $ 0 0 0 $ 0 omated and one assuming that they are. (Show data on a p well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the compan Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4 Reg 5A Req 5B Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit expenses would increase by $52,000 each month. Would you recommend that the company automate (Assuming that the company expects to sell 20,500 units)? Ores O No