E6.3 (LO 1), AP Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management is considering the following independent courses of action to increase net income. Increase selling price by 10% with no change in total variable costs or sales volume. Reduce variable costs to 58% of sales. Reduce fixed costs by $15,000. Instructions Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? Compute break-even point and prepare CVP income statement.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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E6.3 (LO 1), AP Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management is considering the following independent courses of action to increase net income.

Increase selling price by 10% with no change in total variable costs or sales volume.
Reduce variable costs to 58% of sales.
Reduce fixed costs by $15,000.
Instructions

Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?

Compute break-even point and prepare CVP income statement.

 

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