Problem 5-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO5-1, LO5-2, LO5-4, LO5-6, LO5-7] PEM, Incorporated, Is experlencing financlal difficulty due to erratic sales of Its only product, a high-capacity battery for laptop computers. The company's contribution format Income statement for the most recent month is given below. Required: 1. Compute the company's CM ratio and Its break-even poInt In unit sales and dollar sales. 2. The president believes a $6,900 Increase In the monthly advertising budget, combined with an Intensified effort by the sales staff, will Increase unit sales and the total sales by $87,000 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 $34,000 in the monthly advertlsing budget, will double unlt 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 varlable costs by $0.80 per unit. Assumlng no other changes, how many unlts would have to be sold each month to attaln a target profit of $4,000 ? 5. Refer to the original data. By automating, the company could reduce varlable expenses by $3 per unlt. However, fixed expenses would Increase by $54,000 each month. a. Compute the new CM ratio and the new break-even point In unit sales and dollar sales. b. Assume the company expects to sell 20,400 units next month. Prepare two contrlbution format income statements, one assuming operations are not automated and one assuming they are. (Show data on a per-unlt and percentage basis, as well as in total, for each alternative.) c. Would you recommend the company automate Its operations (Assuming that the company expects to sell 20,400 unlts)? Complete this question by entering your answers in the tabs below. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $54,000 each month. Would you recommend the company automate its operations (Assuming that the company expects to sell 20,400 units)