Due to erratic sales of its sole product—a high-capacity batteryfor laptop computers—PEM, Inc., has been experiencing financialdifficulty for some time. The company’s contribution format incomestatement for the most recent month is given below: Sales (13,200units × $20 per unit) $ 264,000 Variable expenses 158,400Contribution margin 105,600 Fixed expenses 117,600 Net operatingloss $ (12,000 )

Required: Please help with questions 4 and 5ONLY.

1. Compute the company’s CM ratio and its break-even point inunit sales and dollar sales.

2. The president believes that a $6,600 increase in the monthlyadvertising budget, combined with an intensified effort by thesales staff, will result in an $87,000 increase in monthly sales.If the president is right, what will be the increase (decrease) inthe company’s monthly net operating income?

3. Refer to the original data. The sales manager is convincedthat a 10% reduction in the selling price, combined with anincrease of $37,000 in the monthly advertising budget, will doubleunit sales. If the sales manager is right, what will be the revisednet operating income (loss)?

4. Refer to the original data. The Marketing Department thinksthat a fancy new package for the laptop computer battery would growsales. The new package would increase packaging costs by 0.60 centsper unit. Assuming no other changes, how many units would have tobe sold each month to attain a target profit of $4,300?

5. Refer to the original data. By automating, the company couldreduce variable expenses by $3 per unit. However, fixed expenseswould increase by $54,000 each month. a. Compute the new CM ratioand the new break-even point in unit sales and dollar sales. b.Assume that the company expects to sell 20,500 units next month.Prepare two contribution format income statements, one assumingthat 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 companyautomate its operations (Assuming that the company expects to sell20,500)?