Exercise 19-3

Norton Company reports the following operating results for the month of August: sales $305,000 (units 5,000); variable costs $220,100; and fixed costs $70,800.

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 by 10% with no change in total variable costs or sales volume.

Net income $

2. Reduce variable costs to 53% of sales.

Net income $

3. Reduce fixed costs by $17,400.

Net income $

Which course of action will produce the highest net income?