Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 10% with no change in total variable costs or sales volume.
2. Reduce variable costs to 58% of sales. 3. Reduce fixed costs by $15,000?
Instructions
Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?