Moran Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $227,500; and fixed costs $67,500. 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 $16,900.

Calculate the operating income that would be earned under each alternative.

		Operating income
Alternative 1		$
Alternative 2		$
Alternative 3		$

Which course of action will produce the highest operating income?