please help with 2-5 required thank you Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing financialdifficulty for some time. The company's contribution format income statement for the most recent month is given below:$ 262,000Sales (13,100 units x $20 per unit)Variable expensesContribution marginFixed expenses131,000131,000146,000Net operating loss$ (15,000)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 $6,000 increase in the monthly advertising budget, combined with an intensified effort by the salesstaff, will increase unit sales and the total sales by $80,000 per month. If the president is right, what will be the increase (decrease) inthe company's 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 of$38,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatingincome (loss)?4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would growsales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how many units would haveto be sold each month to attain a target profit of $4,500?5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenseswould increase by $60,000 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 20,400 units next month. Prepare two contribution format income statements, oneassuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, aswell as in total, for each alternative.)c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,400 units)?Complete this question by entering your answers in the tabs below.Reg 1Req 2Reg 3Req 4Reg 5AReg 5BReg 5C

Solution:- PEM Inc. Calculation of Variable expense per unit Amount $ Note Variable…

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 $6,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $80,000 per month. If the president is right, what will be the increase (decrease) in he company's 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 of $38,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating ncome (loss)? 4. 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 o be sold each month to attain a target profit of $4,500? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $60,000 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 20,400 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.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,400 units)?

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q