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Crane Company reports the following operating results for the month of August: sales $378,000 (units 5,000); variable costs $273,420; and fixed costs $88,200. 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 $12,600. 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?

Crane Company reports the following operating results for the month of August: sales $378,000 (units 5,000); variable costs $273,420; and fixed costs $88,200. 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 $12,600. 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?

FINANCIAL ACCOUNTING
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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Crane Company reports the following operating results for the month of August: sales $378,000 (units 5,000); variable costs $273,420; and fixed costs $88,200. 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 $12,600. 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?
Transcribed Image Text:Crane Company reports the following operating results for the month of August: sales $378,000 (units 5,000); variable costs $273,420; and fixed costs $88,200. 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 $12,600. 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?
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