Questionl Due to erratic sales of its sole product- a high-capacity battery for laptop computers- Parma Ltd. has been experiencing difficulty for some time. The company income statement for the most recent month is given below: Required: 1.a) Compute the company's CM ratio and its break-even point in both units and dollars. [6marks] b) Prepare break even chart for the company using excel spread sheet. |10 marks| 2. a) The president believes that a 516000 increase in the monthly advertising budget combined with an intensified effort by the sales staff, will result in $80000 increase in monthly sales. If the president is right, what will be the effect on the company's monthly net income or loss? [6 marks] b) Prepare break even chart using excel to show the new breakeven point [10 marks] 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of 560000 in the monthly advertising budget will cause unit sales to double. What will the new income statement look like if these changes are adopted? [6 marks] 4. Refer to the original data. The Marketing department thinks that a fancy new package for the laptop computer battery would help sales. The new package would increase packaging cost by 75 cents per unit. Assuming no other changes, how many units would have to be sold each month to earnamnofiu af 50400 [6 marks] h. Assume that the company expects to sell 26000 units next month. Prepare two 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.) [6 marks] c. Would you recommend that the company automate its operation? Explain your answer. [4 marks] Question 2 Florida Favorites Company produces toy alligators and toy dolphins. Fixed costs are $1,290,000 per year. Sales revenue and variable costs ner unit are as follows: Required: 2. Suppose the company currently sells 140,000 alligators per year and 60,000 dolphins per year. Assuming the sales mix stays constant, how many alligators and dolphins must the company sell to breakeven per year? ( 6 marks) b. Suppose the company currently sells 60,000 alligators per year and 140,000 dolphins per year. Assuming the sales mix stays constant, how many alligators and dolphins must the company sell to breakeven per year? ( 6 marks) c. Explain why the total number of toys needed to breakeven in (a) is the same or different from the number in (b) ( 4 marks) d. State four (4) assumptions of CVP analysis. (4 marks)
