The companys contribution format income statement for the most recent month is given below:

Sales (13,400 units $20 per unit)	$ 268,000
Variable expenses	160,800
Contribution margin	107,200
Fixed expenses	119,200
Net operating loss	$ (12,000)

Required:

3.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. What will be the revised net operating income (loss)?

Revised net operating income (loss)

$

4. 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 $0.40 per unit. How many units would have to be sold each month to attain a target profit of $4,100?

Unit sales to attain target profit

5. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $56,000 each month.

a. What is the new CM ratio, break-even point in unit sales, and dollar sales?

CM ratio	55	%
Break-even point in unit sales
Break-even point in dollar sales

b. The company expects to sell 20,500 units next month. Prepare two income statements, one not automated and one that is.

Contribution Income Statement
	Not Automated			Automated
	Total	Per Unit	%	Total	Per Unit	%
Sales		$20	100		$20	100
Variable expenses		12	60		9	45
Contribution margin		$8	40		$11	55
Fixed expenses	119,200
Net operating income