Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Incorporated, has been...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 (12,700 units x $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss Required: $ 381,000 228,600 152,400 170,400 $ (18,000) 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 sales staff, will increase unit sales and the total sales by $85,000 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 $32,000 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 $0.80 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 $53,000 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 20,200 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 20,200 units)? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5A Req 58 Req SC The president believes that a $6,700 increase in the monthly advertising budget, combined with an Intensified effort by the sales staff, will increase unit sales and the total sales by $85,000 per month. If the president is right, what will be the Increase (decrease) in the company's monthly net operating income? (Do not round intermediate calculations.) 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 (12,700 units x $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss Required: $ 381,000 228,600 152,400 170,400 $ (18,000) 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 sales staff, will increase unit sales and the total sales by $85,000 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 $32,000 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 $0.80 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 $53,000 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 20,200 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 20,200 units)? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5A Req 58 Req SC The president believes that a $6,700 increase in the monthly advertising budget, combined with an Intensified effort by the sales staff, will increase unit sales and the total sales by $85,000 per month. If the president is right, what will be the Increase (decrease) in the company's monthly net operating income? (Do not round intermediate calculations.)
Expert Answer:
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
Students also viewed these finance questions
-
Number of each machine needed and total purchasing cost A B. C. b.Consider this additional information: The machines differ in terms of hourly operating costs: The A machines have an hourly operating...
-
4. A 5-year US Treasury bond with a coupon rate of 4.75 percent is trading in the market at a price of $99.35 for a par of $100. What is the yield to maturity of this bond? [Note: US Treasury bonds...
-
Shown below is the equity of Silver Inc. as at 31 December 20XX . 10% cumulative preferred stock, $150 for $900,000 Common stock, $6.50 par, 500,000 shares authorized $2,600,000 Exceeding paid-in...
-
Copper Industries (a sole proprietorship) sold three 1231 assets during 2015. Data on these property dispositions are as follows: a. Determine the amount and the character of the recognized gain or...
-
Directors are subject to more and more liabilities. Why do you think that this has occurred? What are the problems associated with holding directors to higher standards? How can directors protect...
-
Tom took out a $440,000 15-year adjustable rate mortgage with a 4% initial 6-month rate. The amortization table for the initial rate period is shown. After the first 6 months, the rate went up to 5%....
-
Pop and Mom Ltd bought 120,000 of the 200,000 issued ordinary 1 shares of Sonny Ltd for 300,000 on 31 July 2004. Sonny Ltd financial statements are drawn up annually to 31 December. The balance sheet...
-
Martha Jansa executed a will naming her two sons as executors and leaving all her property to them. The will was properly signed and attested to by witnesses. Thereafter, Martha died. When Marthas...
-
Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An...
-
2. (35pt)Evaluate ff 3xy dA, where R is the region bounded by the graphs of y = -x and y = x2, x >0 and R the graph of x = 1.
-
What is your plan for generating brand awareness, equity and loyalty for your fast food sandwich restaurant? You must explain each one of these 3 aspects of your Branding Plan. You must also explain...
-
A company must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that have already cost $132,000 to manufacture. The units can be sold as...
-
Describe microscopically how plastic deformation in polymers is similar/dissimilar to plastic deformation in metal. give the micro definition of strength of metal. give the micro definition of...
-
13.3 (USCS units) An extruder barrel has a diameter of 3.0 in and length of 70 in. The screw rotates at 60 rev/min, its channel depth = 0.25 in, and its flight angle = 17.5. Head pressure at the die...
-
Based on the nature, the products can be classified into goods and services. However, regardless of whether the end product is a good or service, all activities that happen within the scope of...
-
Explain the role and significance of the implementation of internal controls in organization. You are required to include in your response the benefits and constraints of effective internal controls.
-
2. In the circuit given in Figure 2, i,(t) = 5.67cos(5t)A and v (t) = 70.71 cos(5t 60) V a) Find the equivalent load impedance. State whether the load is inductive or capacitive. b) Calculate the...
-
What are the three major activities of a manager?
-
The President of the ICAEW has proposed that regulators from developed and developing countries start talking to agree a set of principles for universal application that could underpin the regulation...
-
Describe the four steps in the planning and control cycle.
Study smarter with the SolutionInn App