Due to erratic sales of its sole producta high-capacity battery for laptop computers–MSQI,Inc., has been experiencing difficulty for some time. The company's contribution format incomestate- ment for the most recent month is given below:Sales (19,500 units × $30 per unit)$585,000Variable expenses409,500Contribution margin .Fixed expenses175,500180,000Net operating loss$ (4,500)Required:1. Compute the company's CM ratio and its break-even point in both unit sales and dollar sales.2. The president believes that a $16,000 increase in the monthly advertising budget, combinedwith an intensified effort by the sales staff, will result in an $80,000 increase in monthlysales. If the president is right, what will be the effect on the company's monthly net operatingincome or loss? (Use the incremental approach in preparing your answer.)3. Refer to the original data. The sales manager is convinced that a 10% reduction in the sellingprice, combined with an increase of $60,000 in the monthly advertising budget, will doubleunit sales. What will the new contribution format income statement look like if these changesare adopted?4. Refer to the original data. The Marketing Department thinks that a fancy new package for thelaptop computer battery would help sales. The new package would increase packaging costsby 75 cents per unit. Assuming no other changes, how many units would have to be sold eachmonth to earn a profit of $9,750?

Solution Note : dear student as per the Q&A guideline we are required to solve the first three…

Answered: Required: 1. Compute the company's CM…

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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