Smith Engine Company manufactures and sells diesel engines for use in small farming equipment. For its $2020$

budget, Smith Engine Company estimates the following:

$($Click the icon to view the budget data.$)$

The first$-$quarter income statement, as of March $31,$ reported that sales were not meeting expectations. During the

first quarter, only $400$ units had been sold at the current price of $$4,500.$

The income statement showed that variable and fixed costs were as planned, which meant that the $2020$

annual net income projection would not be met unless management took action. A management committee

was formed and presented the following mutually exclusive alternatives to the president:

i$]($Click the icon to view the alternatives.$)$

Read the requirements.

Requirement $2.$ Determine which alternative Smith Engine should select to achieve its net income objective. Show your calculations.

Evaluate each of the alternatives presented by the management committee, begin with alternative a$.$

Alternative

a$.$

Revenues

Variable costs

Contribution margin

Fixed costs

Operating income

Income taxes

Net income