Directions: Answer questions fully and turn them in on time No plagiarism 100% original work 1. Explain how successful communication is used throughout a change process to convey vision and strategies to stakeholders. What may be occurring with the communication process if the change process begins to fail? 2. Why is effective and frequent communication so critical to a successful change effort? Describe either a good or a bad example of this from your organization or one that you have studied. Describe how the communication affected the various stakeholders affected by the change effort. Question 1 Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below: Sales (13,000 units × $20 per unit) $ 260,000 Variable expenses 130,000 Contribution margin 130,000 Fixed expenses 145,000 Net operating loss $ (15,000 ) Required: 1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $87,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.60 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,300? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $50,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20,500 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,500)? Question 2 The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local high school. These sweatshirts would ha.

1. Directions: Answer questions fully and turn them in on time No
plagiarism 100% original work
1. Explain how successful communication is used throughout a
change process to convey vision and strategies to stakeholders.
What may be occurring with the communication process if the
change process begins to fail?
2. Why is effective and frequent communication so critical to a
successful change effort? Describe either a good or a bad
example of this from your organization or one that you have
studied. Describe how the communication affected the various
stakeholders affected by the change effort.
Question 1
Due to erratic sales of its sole product—a high-capacity battery
for laptop computers—PEM, Inc., has been experiencing
financial difficulty for some time. The company’s contribution
format income statement for the most recent month is given
below:
Sales (13,000 units × $20 per unit)
$
260,000
Variable expenses
130,000

2. Contribution margin
130,000
Fixed expenses
145,000
Net operating loss
$
(15,000
)
Required:
1. Compute the company’s CM ratio and its break-even point in
unit sales and dollar sales.
2. The president believes that a $6,700 increase in the monthly
advertising budget, combined with an intensified effort by the
sales staff, will result in an $87,000 increase in monthly sales.
If the president is right, what will be the increase (decrease) in
the company’s monthly net operating income?
3. Refer to the original data. The sales manager is convinced
that a 10% reduction in the selling price, combined with an
increase of $39,000 in the monthly advertising budget, will
double unit sales. If the sales manager is right, what will be the
revised net operating income (loss)?
4. Refer to the original data. The Marketing Department thinks
that a fancy new package for the laptop computer battery would
grow sales. The new package would increase packaging costs by
0.60 cents per unit. Assuming no other changes, how many units
would have to be sold each month to attain a target profit of
$4,300?
5. Refer to the original data. By automating, the company could
reduce variable expenses by $3 per unit. However, fixed
expenses would increase by $50,000 each month.
a. Compute the new CM ratio and the new break-even point in

3. unit sales and dollar sales.
b. Assume that the company expects to sell 20,500 units next
month. Prepare two contribution format income statements, one
assuming that operations are not automated and one assuming
that they are. (Show data on a per unit and percentage basis, as
well as in total, for each alternative.)
c. Would you recommend that the company automate its
operations (Assuming that the company expects to sell 20,500)?
Question 2
The Shirt Works sells a large variety of tee shirts and
sweatshirts. Steve Hooper, the owner, is thinking of expanding
his sales by hiring high school students, on a commission basis,
to sell sweatshirts bearing the name and mascot of the local
high school.
These sweatshirts would have to be ordered from the
manufacturer six weeks in advance, and they could not be
returned because of the unique printing required. The
sweatshirts would cost Hooper $24.00 each with a minimum
order of 320 sweatshirts. Any additional sweatshirts would have
to be ordered in increments of 50.
Since Hooper’s plan would not require any additional facilities,
the only costs associated with the project would be the costs of
the sweatshirts and the costs of the sales commissions. The
selling price of the sweatshirts would be $48.00 each. Hooper
would pay the students a commission of $5.00 for each shirt
sold.
Required:
1. What level of unit sales and dollar sales is needed to attain a
target profit of $14,250?
2. Assume that Hooper places an initial order for 320
sweatshirts. What is his break-even point in unit sales and
dollar sales? (Round your intermediate calculations and final
answers to the nearest whole number.)
Question 4

4. Haas Company manufactures and sells one product. The
following information pertains to each of the company’s first
three years of operations:
Variable costs per unit:
Manufacturing:
Direct materials
$
22
Direct labor
$
14
Variable manufacturing overhead
$
5
Variable selling and administrative
$
3
Fixed costs per year:
Fixed manufacturing overhead
$
270,000
Fixed selling and administrative expenses
$
210,000

5. During its first year of operations, Haas produced 60,000 units
and sold 60,000 units. During its second year of operations, it
produced 75,000 units and sold 50,000 units. In its third year,
Haas produced 40,000 units and sold 65,000 units. The selling
price of the company’s product is $52 per unit.
Required:
1. Compute the company’s break-even point in unit sales.
2. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
3. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
Question 5
During Heaton Company’s first two years of operations, it
reported absorption costing net operating income as follows:
Year 1
Year 2
Sales (@ $62 per unit)
$
1,240,000
$
1,860,000
Cost of goods sold (@ $35 per unit)
700,000
1,050,000
Gross margin

6. 540,000
810,000
Selling and administrative expenses*
315,000
345,000
Net operating income
$
225,000
$
465,000
* $3 per unit variable; $255,000 fixed each year.
The company’s $35 unit product cost is computed as follows:
Direct materials
$
7
Direct labor
13
Variable manufacturing overhead
3
Fixed manufacturing overhead ($300,000 ÷ 25,000 units)
12

7. Absorption costing unit product cost
$
35
Forty percent of fixed manufacturing overhead consists of
wages and salaries; the remainder consists of depreciation
charges on production equipment and buildings.
Production and cost data for the first two years of operations
are:
Year 1
Year 2
Units produced
25,000
25,000
Units sold
20,000
30,000
Required:
1. Using variable costing, what is the unit product cost for both
years?
2. What is the variable costing net operating income in Year 1
and in Year 2?
3. Reconcile the absorption costing and the variable costing net
operating income figures for each year.