(Pro forma results) The James Company is attempting to set a new selling price for its single product, a metal file cabinet, for the upcoming year. The current variable production cost is $40 per unit and total fixed costs are $2,000,000.

Fixed manufacturing costs are 80 percent of total fixed costs and are allocated to the product based on the number of units produced. There are no variable selling or administrative costs. Variable and fixed costs are expected to increase by 15 and 8 percent, respectively, next year. Estimated production and sales are 200,000 units. Selling price is normally set at full production cost plus 25 percent.

a. What is the expected full production cost per unit of James’s file cabinets for next year?

b. What is the expected selling price of the product?

c. What is pro forma income before tax using the selling price computed in part (b)?

d. What would be the required selling price for the company to earn income before tax equal to 25 percent of sales?