1. The following information has been provided by Arawak Farms Limited for the month of August.

Sales ( 10,000 Units ) $ 600,000

Variable Costs $ 420,000

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Contribution Margin $ 180,000

Fixed Costs $ 110,000

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Net Income $ 70,000

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Management is considering the following courses of action to increase Net Income:

1. Increase selling price by 5% with no change in variable costs.
2. Reduce variable costs to 66% of sales.
3. Reduce Fixed Costs by $ 10,000.

Required:

1. Advise management on the best course of action to maximize the net income.