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 (13,200 units × $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 264,000 132,000 132,000 147,000 $ (15,000) Required: . Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sale staff, will result in an $84,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the compar 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 o $31,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatin ncome (loss)?
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 (13,200 units × $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 264,000 132,000 132,000 147,000 $ (15,000) Required: . Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sale staff, will result in an $84,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the compar 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 o $31,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatin ncome (loss)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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