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Lando Company is planning on a 20% increase in sales volume next year. This year’s sales...

Lando Company is planning on a 20% increase in sales volume next year. This year’s sales revenue is $3,435,000 and its year-end balance sheet shows total current assets of $830,000, total plant assets of $1,670,000, and total current liabilities of $450,000. The company’s dividend payout ratio is 40% and its profit margin is expected to remain steady at 14%. The company is presently operating at full capacity so it estimates that it will need to purchase $300,000 of additional plant assets to accommodate the increased sales volume.

Required:

A.   Compute next year’s expected net increase in retained earnings.

B.   Using the percentage-of-sales method, compute the required new funds to facilitate the 20% increase in sales volume.

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