PROBLEM $6-22$ CVP Applications; Contribution Margin Ratio; Break$-$Even Analysis; Cost Structure LO$6-1,$ LO$6-3,$

LO$6-4,$LO$6-5,[$O$6-6$

show working out please

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:

Sales units $$$$30$ per unit$)$

$$585,000$

Variable expenses

Contribution margin

Fixed expenses

$409,500$

Net operating loss

Required:

Compute the company's CM ratio and its break$-$even point in unit sales and dollar sales.

The president believes that a $$16,000$ increase in the monthly advertising budget, combined with an intensified effort by the sales staff,

will increase unit sales and the total sales by $$80,000$ per month. If the president is right, what will be the increase $($decrease$)$ in the

company's monthly net operating income?

Refer to the original data. The sales manager is convinced that a $10\%$ reduction in the selling price, combined with an increase of

$$60,000$ in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating

income $($loss$)?$

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 $75$ cents per unit. Assuming no other changes, how many units would have

to be sold each month to attain a target profit of $$9,750?$

Refer to the original data. By automating, the company could reduce variable expenses by $$3$ per unit. However, fixed expenses would

increase by $$72,000$ 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 $26,000$ 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.$)$