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 (12,500 units - $38 per unit) $ 378,000 226,880 Variable expenses Contribution margin Fixed expenses 160,200 Net operating loss $ (18,000) 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 $6,600 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $82,000 per month. If the president is right, what will be the Incresse (decresse) in the company's monthly net operating Income? 3. Refer to the original diets. The sales manager is convinced that s 10% reduction in the selling price, combined with an increase of $39,000 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 dists. 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 to attain a target profit of $4,400? 5. Refer to the original dists. 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. b. Assume that the company expects to sell 20,900 units next month. Prepare two contribution formst income statements, one assuming that operations are not automated and one assuming that they are. (Show dists on a per unit and percentage basis, as well as in total, for each slternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,900 units)? Complete this question by entering your answers in the tabs below. Reg 2 Reg 3 Reg 4 Rag SA Reg 58 Rag SC 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 to attain a target profit of $4,400? (Do not round intermediate calculations. Round final answer to the nearest whole unit.) Show less

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Please answer the 2 sections in the images. #4 & #5B

Complete this question by entering your answers in the tabs below.
Req 1
Req 2
Req 3
Req 4
Req SA
Req SB
Req 5C
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. Assume that the company expects to sell 20,900 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.) (Do not round your intermediate calculations.
Round your percentage answers to the nearest whole number.)
Show less A
PEM, Incorporated
Contribution Income Statement
Not Automated
Automated
Per Unit
Total
Per Unit
%
%
0 S
0
Req 5C >
$
0 S
0
< Req 5A
0
0
S
Total
0
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req SA Req SB Req 5C 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. Assume that the company expects to sell 20,900 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.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole number.) Show less A PEM, Incorporated Contribution Income Statement Not Automated Automated Per Unit Total Per Unit % % 0 S 0 Req 5C > $ 0 S 0 < Req 5A 0 0 S Total 0
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 formaet Income statement for the most recent month is given below
Sales (12,600 units $30 per unit)
Variable expenses
Contribution margin
Fixed expenses
$ 378,000
226,800
151,280
160,200
Net operating loss
$ (18,000)
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 $6,600 Increase in the monthly advertising budget, combined with an intensified effort by the sales
staff, will increase unit sales and the total sales by $82,000 per month. If the president is right, what will be the Increase (decrease) in
the company's monthly net operating Income?
3. Refer to the original dets. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of
$39,000 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 dats. 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 to attain a target profit of $4,400?
5. Refer to the original dats. 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.
b. Assume that the company expects to sell 20,900 units next month. Prepare two contribution format income statements, one
assuming that operations are not automated and one assuming that they are. (Show dists 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 20,900 units)?
Complete this question by entering your answers in the tabs below.
Reg 1
Rag 2
Req 3
Reg 4
Rag SA
Reg 58
SC
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 to attain a target profit of $4,400? (Do not round intermediate calculations. Round final
answer to the nearest whole unit.)
Show less A
Unit sales to attain target profit
<Roq 3
Roq 6A >
Transcribed Image Text: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 formaet Income statement for the most recent month is given below Sales (12,600 units $30 per unit) Variable expenses Contribution margin Fixed expenses $ 378,000 226,800 151,280 160,200 Net operating loss $ (18,000) 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 $6,600 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $82,000 per month. If the president is right, what will be the Increase (decrease) in the company's monthly net operating Income? 3. Refer to the original dets. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 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 dats. 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 to attain a target profit of $4,400? 5. Refer to the original dats. 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. b. Assume that the company expects to sell 20,900 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show dists 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 20,900 units)? Complete this question by entering your answers in the tabs below. Reg 1 Rag 2 Req 3 Reg 4 Rag SA Reg 58 SC 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 to attain a target profit of $4,400? (Do not round intermediate calculations. Round final answer to the nearest whole unit.) Show less A Unit sales to attain target profit <Roq 3 Roq 6A >
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Documentation techniques
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education