Produces memory enhancement kits for fax machines

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Reference no: EM131288401

Faxmatic, Inc., produces memory enhancement kits for fax machines. 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: Sales (15,000 units at $35 per unit) $ 525,000 Variable expenses 315,000 Contribution margin 210,000 Fixed expenses 227,500 Net operating loss $ (17,500) 1. Compute the company's CM ratio and its break-even point in both units and dollars. Refer to the original data. By automating, the company could slash its variable expenses in half. However, fixed costs would increase by $120,000 per month. a. Compute the new CM ratio and the new break-even point in both units and dollars. b. Assume that the company expects to sell 20,900 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. 3. Refer to the original data. The president is convinced that a 10% reduction in the selling price, combined with an increase of $45,000 in the monthly advertising budget, will double unit sales. What will the new contribution format income statement look like if these changes are adopted?

Reference no: EM131288401

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