- Due To Erratic Sales Of Its Sole Product A High Capacity Battery For Laptop Computers Pem Incorporated Has Been Experi 1 (48.88 KiB) Viewed 10 times
- Due To Erratic Sales Of Its Sole Product A High Capacity Battery For Laptop Computers Pem Incorporated Has Been Experi 2 (45.39 KiB) Viewed 10 times
Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been experiencing financial difficulty for some time. The
company's contribution format income
statement for the most recent month is given below: Sales (13,500 units $20 per unit) Variable expenses Contribution margin. Fixed expenses Net operating loss. $ 270,000 162,000 108,000 120,000 $ (12,000) 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 $6,800 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will increase unit sales and the total sales by $84,000 per month. If the president is right, what will be the increase (decrease) in the
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 $37,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 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 $0.50 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300? 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)? Complete this
question by entering your answers in the tabs below.
Complete this
question by entering your answers in the tabs below. Req 1 Req 2 Sales Variable expenses Contribution margin Req 3 Fixed expenses Net operating income S 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. 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.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole number.) $ Req 4 Total PEM, Incorporated Contribution Income
Statement Not Automated Per Unit $ 408,000 244,800 163,200 $ 120,000 43,200 20 12 Reg SA < Req 5A 8 % Req 5B 100 60 40 Total Req 5C Automated Per Unit 183,600 (183,600) $ $ (183,600) Req 5C > 0 % 0 Show less A