Cottonwood Company reports the following operating results for the month of August: sales $395,200(units4,940); variable costs $216,000; and fixed costs $94,200. Management is considering the following independent courses of action to increase net income.

Compute the net income to be earned under each alternative.

1.Increase selling price by12% with no change in total variable costs or units sold.

2.Reduce variable costs to48% of sales.