Canton

The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting CANTON CORPORATION Income Statement for 20X1 Sales Cost of goods sold Gross profit Selling and administrative expense Depreciation Operating profit Taxes (30%) Aftertax income $ 220,500 (15,000 units at $14.70) 112,500 (15,000 units at $7.50) S 108,000 11,025 11,000 $ 85,975 25,792 $ 60,18:2 a. Assume in 20X2 the same 15,000-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $7.50 per unit. Also assume selling and administrative expense will be 5 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 20x2. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Aftertax income b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Gain in aftertax income