A partial income statement of IBN Corporation for Year 0 follows. The company uses just-in-time inventory, so production each year equals sales. Each dollar of finished product produced in Year 0 contained $.50 of direct materials, $0.33333 of direct labor, and $0.16667 of overhead costs. During Year 0, fixed overhead costs were $40,000.
No changes in production methods or credit policies are anticipated for Year 1.

Management has estimated the following changes for Year 1:
_ 30 percent increase in number of units sold
_ 20 percent increase in unit cost of materials
_ 15 percent increase in direct labor cost per unit
_ 10 percent increase in variable overhead cost per unit
_ 5 percent increase in fixed overhead costs
_ 8 percent increase in selling costs because of increased volume
_ 6 percent increase in administrative costs arising solely because of increased wages

There are no other changes.
a. What must the unit sales price be in Year 1 for IBN Corporation to earn a $200,000 operating profit?
b. What will be the Year 1 operating profit if selling prices are increased as before, but unit sales increase by 10 percent rather than 30 percent? (Selling costs would go up by only one-third of the amount projected previously.)
c. If selling price in Year 1 remains at $10 per unit, how many units must be sold in Year 1 for the operating profit to be$200,000?

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IBN CORPORATION Partial Income Statement for Year 0 Sales (100,000 units at $10) Cost of Goods Sold. Gross Margin. Selling Costs. Administrative Costs. Operating Profits. $1,000,000 600,000 S 400,000 150,000 100,000 250,000 150,000