Holcomb and Cromworthy are forecasting a 10% increase in sales next year. Assume the company is operating at 90% capacity. The company has 100,000 shares of common stock outstanding and dividends are $0.22 per share.

1) At 90% capacity, what level will sales have to reach for the discretionary items to become spontaneous that is move-in direct proportion to sales?

*4,277,777

*4,235,000

*3,975,000

2) Compute the new level of net income for the company

*85,880

*80,220

*56,935

3) Compute the company's additional retained earnings for the year

*55,360

*61,420

*58,220

4) Compute the new level of total assets required

*1,779,800

*1,815,800

*1,272,680

5) Calculate the new level of current liabilities

*$502,358

*$568,357

*$571,720

6) Compute the company's new level of retained earnings on the balance sheet

$224,600

$277,666

$284,208

ASSETS 2015 $52,000 402,000 836,000 $1,290,000 527,000 -166,200 $360,800 $1,650,800 2014 $57,600 351,200 715,200 $1,124,000 491,000 -146,200 $344,800 $1,468,800 CASH ACCOUNTS RECEIVABLE INVENTORIES TOTAL CURRENT ASSETS GROSS FIXED ASSETS LESS: ACCUMULATED DEPRECIATION NET FIXED ASSETS TOTAL ASSETS LIABILITIES AND EQUITY ACCOUNTS PAYABLE NOTES PAYABLE ACCRUALS TOTAL CURRENT LIABILITIES LONG-TERM DEBT COMMON STOCK RETAINED EARNINGS TOTAL EQUITY TOTAL LIABILITIES AND EQUITY $175,200 225,000 140,000 $540,200 424,612 460,000 225,988 $685,988 $1,650,800 $145,600 200,000 136,000 $481,600 323,432 460,000 203,768 $663,768 $1,468,800 INCOME STATEMENTS SALES COST OF GOODS SOLD GROSS PROFIT OTHER EXPENSES DEPRECIATION 2015 $3,850,000 -3,250,000 600,000 -430,300 -20,000 $149,700 -76,000 $73,700 -29,480 $44,220 $0.44 2014 $3,432,000 -2,864,000 568,000 -340,000 -18,900 $209,100 -62,500 $146,600 -58,640 $87,960 $0.88 EBIT INTEREST EXPENSE EBT TAXES (40%) NET INCOME EPS ASSETS 2015 $52,000 402,000 836,000 $1,290,000 527,000 -166,200 $360,800 $1,650,800 2014 $57,600 351,200 715,200 $1,124,000 491,000 -146,200 $344,800 $1,468,800 CASH ACCOUNTS RECEIVABLE INVENTORIES TOTAL CURRENT ASSETS GROSS FIXED ASSETS LESS: ACCUMULATED DEPRECIATION NET FIXED ASSETS TOTAL ASSETS LIABILITIES AND EQUITY ACCOUNTS PAYABLE NOTES PAYABLE ACCRUALS TOTAL CURRENT LIABILITIES LONG-TERM DEBT COMMON STOCK RETAINED EARNINGS TOTAL EQUITY TOTAL LIABILITIES AND EQUITY $175,200 225,000 140,000 $540,200 424,612 460,000 225,988 $685,988 $1,650,800 $145,600 200,000 136,000 $481,600 323,432 460,000 203,768 $663,768 $1,468,800 INCOME STATEMENTS SALES COST OF GOODS SOLD GROSS PROFIT OTHER EXPENSES DEPRECIATION 2015 $3,850,000 -3,250,000 600,000 -430,300 -20,000 $149,700 -76,000 $73,700 -29,480 $44,220 $0.44 2014 $3,432,000 -2,864,000 568,000 -340,000 -18,900 $209,100 -62,500 $146,600 -58,640 $87,960 $0.88 EBIT INTEREST EXPENSE EBT TAXES (40%) NET INCOME EPS