PEM, Incorporated, is experiencing financial difficulty due to erratic sales of its only product, a high-capacity battery for laptop computers. The company’s contribution format income statement for the most recent month is given below: Sales (13,000 units × $20 per unit) $ 260,000 Variable expenses 156,000 Contribution margin 104,000 Fixed expenses 116,000 Net operating loss $ (12,000) The sales manager is convinced that a 10% reduction in the selling
PEM, Incorporated, is experiencing financial difficulty due to erratic sales of its only product, a high-capacity battery for laptop computers. The company’s contribution format income statement for the most recent month is given below: Sales (13,000 units × $20 per unit) $ 260,000 Variable expenses 156,000 Contribution margin 104,000 Fixed expenses 116,000 Net operating loss $ (12,000) The sales manager is convinced that a 10% reduction in the selling
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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PEM, Incorporated, is experiencing financial difficulty due to erratic sales of its only product, a high-capacity battery for laptop computers. The company’s contribution format income statement for the most recent month is given below:
| Sales (13,000 units × $20 per unit) | $ 260,000 |
|---|---|
| Variable expenses | 156,000 |
| Contribution margin | 104,000 |
| Fixed expenses | 116,000 |
| Net operating loss | $ (12,000) |
The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $33,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?
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