The Quinn Corporation shows the following income statement. The firm uses FIFO inventory accounting.

a. Assume that the same 10,000 unit volume is maintained in 2016, but the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $5 per unit. Also assume that selling and administrative expense will be 5 percent of sales and amortization will be unchanged. The tax rate is 34 percent. Compute after tax income for 2016.
b. In part a, by what percent did aftertax income increase as a result of a 10 percent increase in the sales price? Explain why this impact occurred.
c. Now assume in 2017 the volume remains constant at 10,000 units, but that the sales price decreases by 15 percent from its 2016 level. Also, because of FIFO inventory policy, cost of goods sold reflects the inflationary conditions of the prior year and is $5.50 per unit. Further assume that selling and administrative expense will be 5 percent of sales and amortization will be unchanged. The tax rate is 34 percent. Compute after tax income.

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QUINN CORPORATION Income Statement for 2015 $100,000 (10,000 units at $10) Sales ..... Cost of goods sold . (10,000 units at $5) 50,000 Gross profit....... 50,000 Selling and administrative expense. 5,000 Amortization.... 10,000 Operating profit.. Taxes (34%) 35,000 11,900 ... .. $ 23,100 Aftertax income.