Reference no: EM133483356
Question: Memofax, Inc. produces memory enhancement software for computers. Sales have been very erratic, with some months showing a profit and some months showing a loss. The company's contribution format income statement for the most recent month is given below.
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Sales (23,500 units)
Less: Variable expenses
Contribution margin
Less: Fixed expenses
Net operating loss
$ 940,000
705,000
235,000
240,000
3 (5,000)
Required:
1. Compute the company's CM ratio and its break-even point in both units and dollars. (Do not round intermediate calculations.
Round your "Break-even point in units" answer up to nearest whole number.)
Contribution margin ratio
Break-even point in units
Break-even point in dollars
25 %
24,000
2. The sales manager feels that an $28,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in a $170,000 increase in monthly sales. If the sales manager is right, what will be the effect on the company s monthly net operating income or loss? (Use the incremental approach