The federal government recently placed a ceiling on the selling price of sheet metal produced by

MOB Company. In 2012, MOB was limited to charging a price that would earn a 20% return on gross sales. On the basis of this restriction, MOB had the following results for 2012:

In 2013, MOB predicted that the sales volume would decrease to 1,000,000 feet of sheet metal. With this level of sales, however, the company anticipated no changes in the levels of fixed and variable costs.
Required:
l. Determine MOB's profit for 2013 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 2012 rate of return on sales (20%) can be maintained. What sales price should the company request, based on 2013 projections? (Round to the nearest cent.)
3. How much profit (in dollars) will MOB earn in 2013 if the sales price determined in part (2) is approved?
4. Interpretive Question: What other factors must be considered by MOB and thegovernment?

Transcribed Image Text:

Sales revenue (1,500,000 feet at $2.00 per foot) $3,000,000 Variable costs (1,500,000 feet at S1.40) Fixed costs. $2,100,000 2,400,000 S 600,000 Proft