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 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: Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president belleves that a $6,300 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $88,000 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 istconvinced that a 10% reduction in the selling price, combined with an increase of $32,000 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 $0.70 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300 ? 5. 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. 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 20,400 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 20,400 units)? Complete this question by entering your answers in the tabs below. Exercise 6-11 (Static) Missing Data; Basic CVP Concepts [LO6-1, LO6-9] Fill in the missing amounts in each of the eight case situations below. Each case is independent of the others. Required: a. Assume that only one product is being sold in each of the four following case situations: b. Assume that more than one product is being sold in each of the four following case situations: Complete this question by entering your answers in the tabs below. Assume that only one product is being sold in each of the four following case situations: Exercise 6-18 (Static) Break-Even and Target Profit Analysis; Margin of Safety; CM Ratio [LO6-1, LO6-3, LO6-5, LO6.6, LO6-7] Menlo Company distributes a single product. The company's sales and expenses for last month follow: Required: 1. What is the monthly break-even point in unit sales and in dollar sales? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3-a. How many units would have to be sold each month to attain a target profit of $90,000 ? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company's CM ratio? If the company can sell more units thereby increasing sales by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? Complete this question by entering your answers in the tabs below. What is the company's CM ratio? If the company can sell more units thereby increasing sales by $50,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase
