5. 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.c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200)? ### Automation Decision Analysis#### Task Description**Complete this question by entering your answers in the tabs below.**The task requires analyzing and entering answers in the provided tabs labeled as Req 1, Req 2, Req 3, Req 4, Req 5A, Req 5B and Req 5C.---#### Requirement Analysis**Current Question:**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. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200 units)?- **Yes**- **No**Note: Select either "Yes" or "No" based on your evaluation.---#### Graphical/Diagrammatic OverviewThere are no graphs or diagrams included in the image. All information is presented in text form. The interface has a user-interactive component allowing the user to select their response ("Yes" or "No") and navigate between requirements.---#### Steps to Analyze the Question:1. **Calculate the Reduction in Variable Expenses:** - Variable expense reduction per unit = $3 - Expected units to be sold = 20,200 - Total reduction in variable expenses = 3 * 20,200 = $60,6002. **Calculate the Increase in Fixed Expenses:** - Increase in fixed expenses per month = $53,0003. **Determine the Net Effect on Expenses:** - Compare the total reduction in variable expenses to the increase in fixed expenses: - Reduction in variable expenses: $60,600 - Increase in fixed expenses: $53,000 - Net effect = $60,600 - $53,000 = $7,600 savings#### Conclusion:Based on the net savings of $7,600, it would be cost-effective to automate the operations.---**Recommendation:**Select **Yes** to recommend automation.---**Navigation:**Click on the "Req 5B" button to proceed to the next part of the task. The "Req 5C" button is currently disabled. ### Case Study: Financial Performance of PEM, Inc. **Overview:**PEM, Inc., a company specializing in high-capacity batteries for laptop computers, has been experiencing financial difficulties due to erratic sales. Below is the company's contribution format income statement for the most recent month.**Income Statement:**- **Sales:** - Quantity Sold: 13,200 units - Selling Price: $20 per unit - **Total Sales Revenue:** 13,200 units x $20 per unit = **$264,000**- **Variable Expenses:** - Total Variable Expenses: **$132,000**- **Contribution Margin:** - Total Contribution Margin: Sales Revenue - Variable Expenses - **$264,000 - $132,000 = $132,000**- **Fixed Expenses:** - Total Fixed Expenses: **$147,000**- **Net Operating Loss:** - Total Contribution Margin - Fixed Expenses - **$132,000 - $147,000 = $(15,000)****Summary:**PEM, Inc. has reported a net operating loss of $15,000 for the most recent month. Despite generating $264,000 in sales revenue, the company's high fixed expenses and significant variable costs have contributed to the financial difficulty.**Graphical Explanation:**There are no accompanying graphs or diagrams in the provided data.**Educational Takeaway:**This case study illustrates the importance of managing both variable and fixed expenses to maintain profitability. PEM, Inc.'s experience demonstrates how fluctuations in sales volume can significantly impact the financial health of a company, especially when fixed costs are substantial. Understanding the contribution margin is crucial for identifying the break-even point and making strategic decisions to enhance overall financial performance.For further reading and detailed analysis, students and professionals are encouraged to explore cost-volume-profit (CVP) analysis and other financial management strategies to improve operational efficiency and profitability.

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 x $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 264,000 132,000 132,000 147,000 $ (15,000)

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 x $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 264,000 132,000 132,000 147,000 $ (15,000)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Company XYZ currently produces and sells 40,000 units. At this level, the total contribution margin is $320,000 while the total fixed costs $80,000. If sales are expected to increase by 20% in the next period, how much would the new profit be ( $)? a. 336,000 b. 272,000 c. 400,000 d. 304,000 e. None of the given answers
I need an answer for the second question. (Letter B) Thank you!
Cullumber Company is considering two alternatives. Alternative A will have sales of $158,500 and costs of $100,100. Alternative B will have sales of $180,900 and costs of $133,200. Compare alternative A with alternative B showing incremental revenues, costs, and net income. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Revenues Costs Net income $ $ Alternative A $ $ Alternative B $ $ Net Income Increase (Decrease)
Spruce Enterprises anticipates fixed costs of $25,000. Variable costs and expenses are expected to be 60% of sales. The president has asked you to develop a worksheet to calculate sales needed to break even and sales needed to achieve any desired net income (file name DESNI). Your worksheet should include a Data Section that contains fixed costs, desired net income, and variable costs as a percentage of sales. Assume as initial input for your model that the company wishes to achieve a net income of $10,000.
Help me solve the requirement below
1. The sales volume of a company is one million dollars per month. If the company spends ($350,000.) per month as fixed costs, and the variable costs are equal to ($0.5) of each dollar. To check sales, it is required: A - Determine the corresponding volume of production, the equilibrium cat? B - What is the effect of reducing variable costs by 25% on the net profit, if that increase was the result of updates in production lines that caused an increase in fixed costs by 10%. Note that sales volume will not change? C- What is the effect of reducing fixed costs by (10%) on the net profit, if that reduction is Will it cause an increase in variable costs by a similar percentage, knowing that the sales volume will not change?
1.) refer to the original data. Compute the company's margin of safety in both dollar and percentage terms ? 2.) what is the company's cm ratio? If he company can sell more units thereby increasing sales by $84000 per month and there is no change in fixed expense, by how much would you expect monthly net operating income to increase?
1. If the company accepts this offer and rejects some business from regular customers so as not to exceed capacity, what would be the total net operating income next year? 2. If the company rejects the offer of the foreign distributor, how much is the opportunity cost?
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1-Due to an increase in labor rates, the company estimates that variable expenses will increase by $3 per ball next year. If this change takes place and the selling price per ball remains constant at $25, what will be the new CM ratio and break-even point in balls? 2. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year? 3. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?
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Your Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows: Annual sales in units 3,000 Selling price per unit $309 Variable costs per unit: Production $130 Selling $50 Traceable annual fixed costs: Production $51,000 Selling $75,000 Allocated annual fixed cost $54,000 If the new product is added to the existing product line, then sales of existing products will decline. As a consequence, the contribution margin of the existing product lines is expected to drop $78,000 per year. What is the increase in net income if the new product is added next year? This is a reverse drop the segment. New CM is positive and new FC and lost CM are negative.