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Problem 6 - 2 2 ( Algo ) CVP Applications; Contribution Margin Ratio; Break - Even Analysis; Cost Structure [ LO 6 - 1 ,
Problem Algo CVP Applications; Contribution Margin Ratio; BreakEven Analysis; Cost Structure LO LO LO LO LO Due to erratic sales of its sole producta highcapacity battery for laptop computersPEM Incorporated, has been experiencing financial difficulty for some time. The companys contribution format income statement for the most recent month is given below: Sales units times $ per unit $ Variable expenses Contribution margin Fixed expenses Net operating loss $ Required: Compute the companys CM ratio and its breakeven point in unit sales and dollar sales. The president believes that a $ increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $ per month. If the president is right, what will be the increase decrease in the companys monthly net operating income? Refer to the original data. The sales manager is convinced that a reduction in the selling price, combined with an increase of $ in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income loss 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 $ per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $ Refer to the original data. By automating, the company could reduce variable expenses by $ per unit. However, fixed expenses would increase by $ 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 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 units
Problem Algo CVP Applications; Contribution Margin Ratio; BreakEven Analysis; Cost Structure LO LO LO LO LO
Due to erratic sales of its sole producta highcapacity battery for laptop computersPEM Incorporated, has been experiencing financial difficulty for some time. The companys contribution format income statement for the most recent month is given below:
Sales units times $ per unit $
Variable expenses
Contribution margin
Fixed expenses
Net operating loss $
Required:
Compute the companys CM ratio and its breakeven point in unit sales and dollar sales.
The president believes that a $ increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $ per month. If the president is right, what will be the increase decrease in the companys monthly net operating income?
Refer to the original data. The sales manager is convinced that a reduction in the selling price, combined with an increase of $ in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income loss
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 $ per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $
Refer to the original data. By automating, the company could reduce variable expenses by $ per unit. However, fixed expenses would increase by $ 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 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 units
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