Moran Company reports the following operating results for the month of August: sales $310,000 (units 5,000); variable costs $217,000; and fixed costs $70,000. Management is considering the following independent courses of action to increase operating income:
1. Increase the selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 65% of sales.
3. Reduce fixed costs by $10,000.
Instructions
Calculate the operating income to be earned under each alternative. Which course of action will produce the highest operating income?