C-V-P Analysis—Return on Sales The federal government recently placed a ceiling on the selling price of sheet metal produced by MOB Company. In 2009, MOB was limited to charging a price that would earn a 20% return on gross sales. On the basis of this restriction, MOB had the following results for 2009:

In 2010, MOB predicted that the sales volume would decrease to 900,000 feet of sheet metal. With this level of sales, however, the company anticipated no changes in the levels of fixed and variable costs.
Required:
1. Determine MOB’s profit for 2010 if all forecasts are realized. Compute both the dollar amount of profit and the percentage return on sales.
2. MOB plans to petition the government for a price increase so that the 2009 rate of return on sales (20%) can be maintained. What sales price should the company request, based on 2010 projections? (Round to the nearest cent.)
3. How much profit (in dollars) will MOB earn in 2010 if this sales price, as determined in part (2), is approved?
4. Interpretive Question: What other factors must be considered by MOB and the government?

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Sales revenue (1,150,000 feet at $2.00 per foot) Variable costs (1,150,000 feet x $1.40) $1,610,000 Fixed costs Profit 230,000 $2,300,000 1,840,000 $ 460,000