The income statement for the year ended December 31, 2009, for Chico Co. follows:

Sales volume in 2010 is expected to increase by 15 percent because of a 5 percent decrease in selling price. Material costs are expected to increase 7 percent, but labor costs are expected to decrease by 10 percent due to increased automation at the company. Overhead is applied to production based on a percentage of direct labor costs; this percentage will increase by 5 percent because of the newly installed automated equipment. Seventy percent of the selling expenses are variable; the remainder is fixed. All administrative costs are fixed and are expected to increase by 20 percent in 2010. The company€™s tax rate will not change.
Required:
(a) Prepare a pro forma income statement for the year ended December 31, 2010.
(b) If management wanted net income to be $636,000 in 2010, what would selling price per unit (rounded to the nearest cent) have to be at the new sales volume? Prepare a pro forma income statement to prove your answer.

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Sales (140,000 x $15) Cost of goods sold $2,100,000 Direct material Direct labor Overhead $560,000 350,000 122,500 1,032,500) Gross profit Expenses S1,067,500 Selling Administrative $120,000 150,000 (270,000) Income before taxes Income taxes Net income 797,500 (319,000) S 478,500