90.2K

Verified Solution

Link Copied!

Problem 5-22 (Algo) CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO5-1, LO5-3, LO5-4, LO5-5, LO5-6] Due to erratic sales of its solo product-a high-capacity battery for laptop computers-pem, Incorporated. has been experiencing financial diff culty for some time. The compony's contribution foemat income statement for the most recent month is given below. Required: 1. Compute the company's CM ratio and its break-oven point in unit sales and dollar sales 2. The president believes that a $6,700 increase in the nonthly advertising budget, combined with an intensified effort by the saios statf, will increase unit soles and the total sales by $80,000 per month. If the president is right, what will bet the increase (decrease) in the company's monthy net operating income? 3. Refer to the oriqinal data. The salos manager is conwinced that a 10\% reduction in the seling price. combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what wil be the revised net ogerating income (loss)? 4. Refer to the originat data. The Mariceting Department thinks that a fancy new package for the lapbog computer battery would grow sales. The new package would increase packaging costs by $0.70 per unit. Assuming no other changes, how mamy units would have 10 be sold each morith to attain a tarpet profit of $4,200 ? 5. Refer to the originnl dsth. By automating, the company could reduce variable expenses by 53 per unit. However, fixed exhetses would increase by $59000 each menth. a. Compute the new CM ratio and the new breakeven point in unit sales and dollar sales. b. Assume that the compary expects to sell 20.000 units next month. Prepare two contraubian format income stotements, gete assuming that oporations are not automated and ono assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for coch alternative

Answer & Explanation Solved by verified expert

See Answer