Blossom Company reports the following operating results for the month of August: sales $384,000 (4,800 units), variable costs$251,000, and fixed costs $96,000. Management is considering the following independent courses of action to increase net income.1. Increase the unit selling price by 15% with no change in total variable costs, fixed costs, or units sold.Reduce variable costs to 67% of sales while holding fixed costs, quantity, and unit selling price constant.2.Compute the net income to be earned under each alternative.1.2.Net incomeNet incomeWhich course of action will produce the higher net income?♥

One of the cost accounting techniques that aid in examining the effects of various cost and…

Answered: Blossom Company reports the following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Westerville Company reported the following results from last year’s operations: Sales $ 1,500,000 Variable expenses 690,000 Contribution margin 810,000 Fixed expenses 435,000 Net operating income $ 375,000 Average operating assets $ 1,250,000 At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics: Sales $ 420,000 Contribution margin ratio 70 % of sales Fixed expenses $ 252,000 The company’s minimum required rate of return is 10%. 1. Assume that the contribution margin ratio of the investment opportunity was 65% instead of 70%. If Westerville’s Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? yes or no 2. Would the owners of the company want her to pursue the investment opportunity?
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