The income statement for Haslam Corp. presented below shows the operating results for the fiscal year just ended. Haslam produced and sold 4,000 tons of product during that year. The manufacturing capacity of Haslam’s facilities is 10,000 tons of product.

Revenues                                                               $2,000,000

Variable costs:                       

Manufacturing                        $800,000

Nonmanufacturing                 400,000                  1,200,000

Contribution margin                                                   800,000

Fixed costs:

Manufacturing                        300,000

Nonmanufacturing                 200,000                      500,000

Operating income                                                       300,000

Income taxes (20%)                                                    60,000

Net income                                                               $240,000

Required:

1. a). If the sales volume is estimated to be 4,500 tons for next year, and if the selling price and cost-behavior patterns remain the same the next year, how much net income does Haslam expect to earn next year?
2. b). Assume Haslam estimates the selling price per ton will decline 10% next year, variable cost will increase by $50 per ton, and total fixed costs will increase by $50,000. Compute how many tons must be sold next year to earn a net income of $300,000. Comment on your answer.