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Problem 5-22 CVP Applications; Contribution Margin Ratio; Break-Even Analysis; Cost Structure [LO5-1, LO5-3, L05-4, LO5-5, LO5-6] 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 (12,600 units x $30 per unit) Variable expenses Contribution margin Fixed expenses Net operating loss 378,000 226, 800 151,200 169,200 (18,000) Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $38,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? (Losses should be entered as a negative value.) Revised net operating income (loss) Req 2 Req4 Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $57,000 each month. Assume that the company expects to sell 20,900 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.) show less PEM, Inc. Contribution Income Statement Not Automated Automated Total Per Unit Total Per Unit 01% K Req 5A Req 5C > Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $57,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,900)? Yes No