a. Compute the volume in units and the dollar sales level necessary to maintain the present profit level, assuming that the maximum price increase is implemented. 59,365 units or sales of $1,959,045(see calculations below)

Current profit = 60,000 units x ($30 – $15)

= $900,000 – $700,000

= $200,000

Variable costs = $15.00 (these calculations were done in excel first for verification) Labor = 115% x 50% x $15 +

Materials = 110% x 25% x $15 +

Overhead = 120% x 25% x $15 =

New variable cost per unit = $17.25

(these calculations were done in excel first for verification)

Price: New price = 110% x $30 = $33.00 Fixed costs: New fixed costs = 105% x $700,000 = $735,000 Sales: Profit target = = $200,000

Formula is: Profit = (P – V)X – F

$200,000 = ($33.00 – $17.25)X – $735,000

X = ($935,000 / ($33.00 – $17.25)

X = 59,365 units or sales of (59,365 X $33) = $1,959,045

b. Compute the volume of sales and the dollar sales necessary to provide the 6 percent increase in profits, assuming that the maximum price increase is implemented. 60,127 units or sales of $1,984,191(see calculations below)

(these calculations were done in excel first for verification)

Profit target = $200,000 X 106% = $212,000 (this represents the 6% increase in profits)

Formula is: Profit = (P – V)X – F

$212,000 = ($33.00 – $17.25)X – $735,000

X = $947,000 / ($33.00 – $17.25)

X = 60,127 units or sales of (60,127x $33.00) = $1,984,191

c. If the volume of sales were to remain at 60,000 units, what price would be required to attain the 6 percent increase in profits? $33.03 (see calculations below)

Formula is: Profit = PX – VX – F

$212,000 =...

(1)