Compute the companys cm ratio

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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.

& 00.58.16

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

Reference no: EM133483356

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