N4.Account Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencingfinancial difficulty for some time. The company's contribution format income statement for the most recent month is given below:Sales (12,600 units × $30 per unit)Variable expensesContribution marginFixed expensesNet operating lossRequired:1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales.2. The president believes that a $6,400 increase in the monthly advertising budget, combined with an intensified effort by the salesstaff, will increase unit sales and the total sales by $84,000 per month. 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 convinced that a 10% reduction in the selling price, combined with an increase of$36,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatingincome (loss)?4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would growsales. The new package would increase packaging costs by $0.50 per unit. Assuming no other changes, how many units would haveto be sold each month to attain a target profit of $4,200?5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenseswould increase by $52,000 each month.a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.b. Assume that the company expects to sell 20,300 units next month. Prepare two contribution format income statements, oneassuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, aswell as in total, for each alternative.)c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20.300 units)?Complete this question by entering your answers in the tabs below.Req 1Req 2$ 378,000226,800151,200169,200$ (18,000)Req 3CM ratioBreak-even point in unit salesBreak-even point in dollar salesReg 496Reg 1Reg 5ACompute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do not round intermediatecalculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should be entered as "23").Req 5BReq 5CReq 2 >

The break-even sales are the sales where business earns no profit no sales during the period. The…

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: Sales (12,600 units × $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 378,000 226,800 151,200 169,200 $ (18,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales.

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: Sales (12,600 units × $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 378,000 226,800 151,200 169,200 $ (18,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 35P

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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 (13,000 units × $30 per unit) $ 390,000 Variable expenses 234,000 Contribution margin 156,000 Fixed expenses 174,000 Net operating loss $ (18,000 ) Required: Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. The president believes that a $6,100 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $87,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income? Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price,…
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 (12,600 units × $20 per unit) $ 252,000 Variable expenses 151,200 Contribution margin 100,800 Fixed expenses 112,800 Net operating loss $ (12,000 ) Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.
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: Sales (13,500 units × $30 per unit) $ 405,000 Variable expenses 243,000 Contribution margin 162,000 Fixed expenses 180,000 Net operating loss $ (18,000) Required: 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $37,000 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…