Problem 5-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [L05-1, L05-3, L05-4, L05-5, L05-6] Due to erratic sales of its sole producta highcapacity battery for laptop computersFEM, Incorporated, has been experiencing financial difficulty for some time. The company's contribution format income statementfor the most recent month is given below: Sales (12,688 units x $38 per' unit) 55 378,888 'ul'ar'iable expenses 189,888 Contribution margin . 189,888 Fixed expenses 211,588 Net operating loss 55 (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 $7,000 increase in the monthly advertising budget, combined with an intensied effort by the sales staff, will increase unit sales and the total sales by $84,000 per month. lfthe 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 $36,000 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 $4,700? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month. a. Compute the new CM ratio and the new breakeven point in unit sales and dollar sales. b. Assume that the company expects to sell 20,700 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 20,700 units)? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Reg 4 Req 5A Req 5B Req 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 (i.e., 0.234 should be entered as "23"). CM ratio % Break-even point in unit sales Break-even point in dollar salesComplete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5A Reg SB Reg 5C The president believes that a $7,000 increase in the monthly advertising budget, combined with an intensied effort by the sales staff, will increase unit sales and the total sales by 584,000 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.) -_ Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 5A Reg 5E5 Reg 5C Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $36,000 in the monthly advertising budget, will double unit sales. It the sales manager is right, what will be the revised net operating income (loss)? (Losses should be entered as a negative value.) Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Red 4 Reg 5A Req 53 Reg 5c Refer to the original data. The Marketing Department thinks that a fancy newr package for the laptop computer batten,r would grow sales. The new package would increase packaging costs by $030 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,700? {Do not round intermediate calculations. Round final answer up to the nearest whole unit.) Show less; Unit sales to attain target prot :l Complete this question by entering your answers in the tabs below. Red 1 Req 2 Req 3 Req 4 Req 5A Req SB Red EC Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $51,000 each month. Compute the new CM ratio and the new breakeven point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (Le.r 0.234 should be entered as "23"), round "Break-even point in unit sales" up to the nearest whole unit and round "Breakeven point in dollar sales" to the nearest whole dollar.) Show less; CM ratio Break-even point in unit sales Breakeven point in dollar sales Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3 Reg 4 Reg 5A Req SB Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, xed expenses would increase by $51,000 each month. Assume that the company expects to sell 20,700 units next month. Prepare two contribution fonnat 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; Complete this question by entering your answers in the tabs below. Red 1 Req 2 Red 3 Req 4 Red 5A Req SB Red 5C Refer to the original data. By automating, the company could reduce variable expenses by 53 per unit. However, fixed expenses would increase by $51,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,700 units}? O'r'es O No