Problem 5-22 CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LOS LO5-3, LO5-4, LO5-5, LO5-6) Due to erratic sales of its sole product a high-capacity battery for laptop computers--PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below. $270,000 Sales (13,500 units $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss 162,000 108,000 120, eee $(12, eee) 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 $6,500 increase in the monthly advertising budget, combined with an intensified effort by the sale staff, will result in an $85,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the compa 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 $34.000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operat income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would gr sales. The new package would increase packaging costs by $0.50 per unit. Assuming no other changes, how many units would h to be sold each month to attain a target profit of $4,000? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expense would increase by $51,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. Prev 1 of 5 !!! Next > ed Homework 5. Refer to the original data. By automating, the company could reduce variable expenses would increase by $51,000 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 21,000 units next month. Prepare two contribu assuming that operations are not automated and one assuming that they are. (Show data as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the cor Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Se 4 Req 5A Req 5B Req5 Compute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do nc calculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should be entered a CM ratio Break-even point in unit sales Break-even point in dollar sales Reg 2 > c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21,000)? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Reg 4 Req 5A Req 5B Req 5C 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 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) Prev 1 of 5 5 Next > 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 21,000 units next month. Prepare two contribution format income statements, o assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21.000)? Complete this question by entering your answers in the tabs below. Req1 Req 2 Req3 Reg 4 Req 5A Req 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 $0.50 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,000? (Do not round Intermediate calculations. Round final answer to the nearest whole unit.) Show less Unit sales to attain target profit Prev 1 of 5 Next > assumy lat operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21,000)? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4 Req 5A Req 5B 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 $51,000 each month. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (.e., 0.234 should be 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 Prev 1 of 5 Next > Reg 1 Reg 2 Req3 Reg 4 Req 5A Req 5B Req SC 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. Assume that the company expects to sell 21,000 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, Inc. Contribution Income Statement Not Automated Total Per Unit % Automated Per Unit Total ( Req 5A Req 5C > assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21,000)? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Req 4 Req SA Req 5B 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 $51,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 21,000)? OYes ONO