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:Sales (13,200 units × $20 per unit)Variable expensesContribution marginFixed expensesNet operating loss$ 264,000132,000132,000147,000$ (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 $6,700 increase in the monthly advertising budget, combined with an intensified effort by the salesstaff, will result in an $84,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company'smonthly 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$31,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatingincome (loss)? Complete this question by entering your answers in the tabs below.Req 1Req 2Req 3CM ratioBreak-even point in unit salesBreak-even point in dollar salesReq 4%Req 5ACompute the company's CM ratio and its break-even point in unit sales and dollar sales. ((Do not round intermediatecalculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should be entered as "23").)< Req 1Req 5BReq 5CReq 2 >

Contribution margin is the difference between the selling price and the variable cost. Break-even…

Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13,200 units × $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 264,000 132,000 132,000 147,000 $ (15,000) Required: . Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sale staff, will result in an $84,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the compar 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 o $31,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatin ncome (loss)?

Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13,200 units × $20 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 264,000 132,000 132,000 147,000 $ (15,000) Required: . Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sale staff, will result in an $84,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the compar 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 o $31,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operatin ncome (loss)?

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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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 (13,000 units x $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss $ 390,000 195,000 195,000 217,500 $ (22,500)
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