Sales (13,000 units $20 per unit) $ 260,000

Variable expenses 130,000

Contribution margin 130,000

Fixed expenses 145,000

Net operating loss $ (15,000)

1 Refer to the original data. By automating, the company could reduce variable expenses $3 per unit . However, fixed expenses would increase by $52,000 each month.

a. Compute the new CM ratio and the new break-even point in both unit sales and dollar sales. (Use the CM ratio to calculate your break-even point in dollars. Round your final answers to the nearest whole number.)

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.

c. would you recommend that company automates their operations ( assuming that compani expect to sell 20,200)