CVP Analysis and Price Changes: Denton Manufacturing Company is concerned about the possible effects of inflation on its operations. Presently, the company sells 200,000 units at a unit price of $15. The variable costs of production are $8, and fixed costs amount to $1,120,000. The present profit level is $280,000. Production engineers have advised management that unit labor costs are expected to rise by 10 percent in the coming year and unit materials costs are expected to rise by 15 percent. Of the variable costs, 25 percent are from labor and 50 percent are materials. All other variable costs are expected to increase by 5 percent. Sales prices cannot increase more than 8 percent. It is also expected that fixed costs will rise by 2 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profits in real-dollar terms. It is expected that to accomplish this objective, profits will have to increase by 6 percent during the year.

Required:

a. Compute the volume of sales and the dollar sales level necessary to maintain the present profit level in normal terms, assuming the maximum price increase is implemented.

b. Compute the volume of sales and the dollar sales level necessary to attain the same profit level in real-dollar terms, assuming the maximum price increase is implemented.

c. If the volume of sales were to remain at 200,000 units, what price increase would be required to attain the same profit level in real-dollar terms?