Yams Company reports the following operating results for the month of August: sales $372,300 (units 5,100), variable costs $256,000, and fixed costs $99,000. Management is considering the following independent courses of action to increase net income.

1. Increase selling price by 12% with no change in total variable costs or units sold.

2. Reduce variable costs to 65% of sales Compute the net income to be earned under each alternative.

Which course of action will produce the higher net income?