produced by MOB Company. In 2000, MOB was limited to charging a price that would earn a 20 percent retum on gross sales. On the basis of this restriction, MOB had the following results for 2000 :

In 2001, 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 income for 2001 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 2000 rate of return on sales ( 20 percent) can be maintained. What sales price should the company request, based on 2001 projections? (Round to the nearest cent.)

3. How much profit (in dollars) will MOB earn in 2001 if this sales price, as determined in (2), is approved?

4. Interpretive Question: What other factors must be considered by MOB and the government?