Hebrides 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 companyAc??cs contribution-format

income statement for the most recent month is given below:

at $20 per unit)

expenses

margin

Required:

Compute the companyAc??cs CM ratio and its break-even point in both

units and dollars. (Omit the "%" & "$" signs in your

response.)

units

dollars

$       

The sales manager feels that an $12,000 increase in the monthly

advertising budget, combined with an intensified effort by the

sales staff, will result in a $112,000 increase in monthly sales.

If the sales manager is right, what will be the effect on the

companyAc??cs monthly operating income or loss? (Use the incremental

approach in preparing your answer.) (Omit the "$" sign in

your response.)

contribution margin

$   

costs:

    Increased advertising cost

select)DecreaseIncrease in monthly operating income

$   

Refer to the original data. The president is convinced that a

10% reduction in the selling price, combined with an increase of

$94,000 in the monthly advertising budget, will cause unit sales to

double. What will the new contribution-format income statement look

like if these changes are adopted? (Input all amounts as

positive values. Omit the "$" sign in your response.)

select)Contribution marginVariable expensesFixed expensesSalesCost

of goods sold

$   

select)Contribution marginVariable expensesCost of goods soldFixed

expensesSales

select)Contribution marginFixed expensesCost of goods

soldSalesVariable expenses

select)SalesFixed expensesVariable expensesCost of goods

soldContribution margin

select)Operating incomeOperating loss

$   

companyAc??cs advertising agency thinks that a new package would help

sales. The new package being proposed would increase packaging

costs by $0.60 per unit. Assuming no other changes, how many units

would have to be sold each month to earn a profit of $3,900?

Refer to the original data. By automating certain operations,

the company could slash its variable expenses in half. However,

fixed costs would increase by $137,000 per month.

Compute the new CM ratio and the new break-even point in both

units and dollars. (Round your answers to

1 decimal place. Omit the "%" & "$" signs in

your response.)

units

dollars

$       

Assume that the company expects to sell 37,000 units next month.

Prepare two contribution-format income statements, one assuming

that operations are not automated and one assuming that they

are.(Round your percentage answers to 1 decimal place and

other answers to the nearest dollar amount. Omit

the "%" & "$" signs in your

response.)

Not Automated

Automated

select)Fixed expensesCost of goods soldVariable

expensesContribution marginSales

$   

$   

$   

$   

select)Fixed expensesContribution marginVariable expensesCost of

goods soldSales

select)Contribution marginVariable expensesSalesCost of goods

soldFixed expenses

$   

$   

select)Cost of goods soldFixed expensesVariable

expensesSalesContribution margin

select)Operating lossOperating income

$   

$