Problem 6-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO6-1, LO6-3, L06-4, LO6-5, LO6-6) Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13, 100 units * $30 per unit) $ 393,000 Variable expenses 235,800 Contribution margin 157,200 Fixed expenses 175, 200 Net operating loss $ (18,000) 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 $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff , will increase unit sales and the total sales by $87,000 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 $39,000 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 $4.700? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, Txed expenses would increase by $52,000 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 20,600 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 20,600 units)? well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4 Reg 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 calculations. Round "CM ratio" to the nearest whole percentage (1.e., 0.234 should be entered as "23"). CM ratio % Break-even point in unit sales Break-even point in dollar sales Req 2 > 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 increas $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net ope Income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery woul- sales. The new package would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units wou 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 expe would increase by $52.000 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 20,600 units next month. Prepare two contribution format income statements assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage be well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,600 Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req 3 Req4 Req SA Reg SB Req 5C The president believes that a $6,700 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $87,000 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.) by would increase by $52.000 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 20,600 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 20.600 units? Complete this question by entering your answers in the tabs below. Reg 1 Req2 Req3 Req 4 Red 5A Req 5B Reg SC Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an Increase of $39,000 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 not operating income (loss) well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,600 units Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Recite Reg SA Reg 5B Reg 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 $0.60 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 to the nearest whole unit.) Show less Unit sales to attain target profit Req3 Req 5A >