Problem 6-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO6-1, LO6-3, LO6-4, LO6-5, LO6-6] Due to erratic sales of its sole product-a high-capacity battery for laptop computersPEM, Incorporated, has been experiencing financial difficulty for some time. 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 that a $6,100 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $85,000 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 $33,000 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 $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,200 ? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $57,000 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 20,300 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 20,300 units)? Complete this question by entering your answers in the tabs below. Compute the company's CM ratio and its break-even point in unit sales and dollar sales calculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should be Complete this question by entering your answers in the tabs below. The president believes that a $6,100 increase in the monthly advertising budget, combined sales staff, will increase unit sales and the total sales by $85,000 per month. If the preside increase (decrease) in the company's monthly net operating income? (Do not round interm Complete this question by entering your answers in the tabs below. Refer to the original data. The sales manager is convinced that a 10% reduction in the increase of $33,000 in the monthly advertising budget, will double unit sales. If the sal revised net operating income (loss)? (Losses should be entered as a negative value.) Complete this question by entering your answers in the tabs below. Refer to the original data. The Marketing Department thinks that a fancy new package for t grow sales. The new package would increase packaging costs by $0.60 per unit. Assuming would have to be sold each month to attain a target profit of $4,200 ? (Do not round interm answer up to the nearest whole unit.) 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 expenses would increase by $57,000 each month. Compute the new CM ratio and the new dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whol entered as " 23, round "Break-even point in unit sales" up to the nearest whole unit and sales" to the nearest whole dollar.) tering your answers in the tabs below. imating, the company could reduce variable expenses by $3 per unit. However, fixed 00 each month. Compute the new CM ratio and the new break-even point in unit sales and iediate calculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should be ven point in unit sales" up to the nearest whole unit and round "Break-even point in dollar Show lessA the company expects to sell 20,300 units)? 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 would increase by $57,000 each month. Assume that the company expects to sell 20,300 contribution format income statements, one assuming that operations are not automated data on a per unit and percentage basis, as well as in total, for each alternative.) (Do not Round your percentage answers to the nearest whole number.) 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 expenses would increase by $57,000 each month. Would you recommend that the compan (Assuming that the company expects to sell 20,300 units)
