LOOKING FOR 5A AND 5B Memofax, Inc. produces memory enhancement software for computers. Sales have...
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Accounting
LOOKING FOR 5A AND 5B
Memofax, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months showing a profit and some months showing a loss. The companys contribution format income statement for the most recent month is given below:
Sales (22,500 units at $30 per unit)
$
675,000
Less: Variable expenses
472,500
Contribution margin
202,500
Less: Fixed expenses
211,500
Net operating loss
$
(9,000)
Required:
5.
Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $81,000 per month.
a.
Compute the new CM ratio and the new break-even point in both units and dollars. (Do not round intermediate calculations. Round "Contribution Margin Ratio" to 2 decimal places.)
b.
Assume that the company expects to sell 27,000 units next month. Prepare two contribution format income statements: one assuming that operations are not automated, and one assuming that they are. (Do not round intermediate calculations. Round "Per Unit" and "Percentage" to 2 decimal places.)
*****************THANK YOU**************
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