I can\'t seem to figure out the correct answer for question 2 here. Thank you in

Question

I can't seem to figure out the correct answer for question 2 here. Thank you in advance for all your help m t-.644635250236333 1522965888325 Due to erratic sales of its sole product-a high-capacity battery for laptop computers-PEM, Inc., has been experiencing difficulty for some time. The company's contribution format income statement for the most recent month is given below Sales (13,000 units $40 per unit) Variable expenses $520,000 312.000 Contribution margin Fixed expenses 208,000 232,000 Net operating loss s (24,000) Required: 1. Compute the company's CM ratio and its broak-even point in both unit sales and dollar sales. CM ratio Break-even point in units Break-even point in dollars580,000 14,500 2. The president believes that a $6,500 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $81,000 increase in monthly sales. If the president is right, what will be the efflect on the company's monthly net operating income or loss? (Use the incremental approach in preparing your answer.)

Explanation / Answer

Req 1: Contribution: $ 208000 Sales: $ 520000 CM ratio= Contribution/ Sales *100 = 208000 /520000*100 = 40% CM per unit = 40-24= 16 per unit Break even in units = Fixed cost / CM per unit = 232000/16= 14500 units Break even in $ = Fixed cost / Cm ratio = 232000/40% = $580,000 Req 2: Incremental analysis. Incremental revenue 81000 CM ratio 40% Contribution margin earned 32400 Lless: Addition advertisement 6500 Net increase in Income 25900

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