Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (19,500 units * $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 585,000 409,500 175,500 180,000 $ (4,500) 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 $16,000 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 Increase in monthly sales. 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 $60,000 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 75 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $9,750? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 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 26,000 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 26,000)? Answer is not complete. Complete this question by entering your answers in the tabs below. Reqli Reg 2 Reg 3 Reg 4 Reg SA Reg 5B Reg 5C Compute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (1.e., 0.234 should be entered as "23").) 40 CM ratio Break-even point in unit sales Break-even point in dollar sales 14,600 $ 438,000 3 Rog Reg 2 > Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg SA Reg SB Reg 5C The president believes that a $16,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $80,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? (Do not round Intermediate calculations.) Increases $ 29,500 Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req3 Reg 4 Reg SA Req SB Req 5C Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an Increase of $60,000 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 net operating income $ 29,600 floss) Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Req 5A Req 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 75 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $9,7507 (Do not round intermediate calculations.) Unit sales to attain target profit 15,789 ( Req3 Req5A > Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Req2 Reg 3 Req 4 Req SA Req 5B Reg SC Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 each month. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. (Do not round Intermediate calculations. Round "CM ratio" to the nearest whole percentage (I.e., 0.234 should be entered as "23") and other answers to the nearest whole number.) Show less CM ratio 50 % Break-even point in unit sales Break-even point in dollar sales 15,213 456,4003 Reg 1 Reg 2 Reg 3 Reg 4 Reg SA Reg 5B Reg 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 each month. Assume that the company expects to sell 26,000 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.) Show less Automated Per Total % Unit Sales PEM, Inc Contribution Income Statement Not Automated Per Total % Unit $630,000 $ 30 100 % 378,000 18 60 % 252,000 $ 12 40 % 175 200 S 76,800 $630,000 $ 30 315,000 15 Variable expenses Contribution margin Fixed expenses 100% 50 % 50 % 315,000 $ 15 OOOO 3 228,200 86,800 $ Net operating income Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Req 5A Reg 5B Reg SC Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $72,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 26,000)? OYes No