Ger Company reports the following operating results for the month of August: Sales \(\$ 300,000\) (units 5,000); variable costs \(\$ 210,000\); and fixed costs \(\$ 70,000\). 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.

2. Reduce variable costs to \(58 \%\) of sales.

3. Reduce fixed costs by \(\$ 20,000\).

Instructions:

Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?