SECTION 3: COST-VOLUME-PROFIT ANALYSIS (TOTAL: 35 MARKS) SD Robot Toys Ltd produces robot toys which have walking function, multicolour lights, built in music, and hand movements. Sales have been very erratic with some months showing profits and some months showing a loss. The company's contribution format margin income statement for the most recent month is given below: Required: 1. Compute the company's CM ratio and its break-even point in both units and dollars. (6 marks) 2. Refer to the original data (not using the assumptions in question 2). The president is convinced that a 10% reduction in selling price, combined with an increase of $35,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted? (5 marks) Please type your answer here 3. Refer to the original data (not using the assumptions in question 2 and 3 ). The company's advertising agency thinks that a new package would help improve sales. The new package being proposed would increase packaging costs by $0.60 per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of $4,500 ? (4 marks) Refer to the original data (not using the assumptions in question 2,3 and 4 ). By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $118,000 per month. I. Compute the new CM ratio and the new break-even point in both units and dollars (6 marks) II. Assume that the company expects to sell 20,000 units next month. Prepare two contribution format income statement, one assuming that operations are not automated (from original data) and one assuming that they are. (10 marks) Plasea twe vaiur ancinar haral III. Would you recommend the company to automate its operations? Explain. (4 marks)