Norton Company reports the following operating results for the month of August: sales $310,000 (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 fi xed 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?

AppendixLO1