Number 5 Birchfield Company reports the following operating results for the month of February: Sales $900,000 (units 15,000); variable costs $472,500; and fixed costs $202,500. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 2.5% with no change in total variable costs or units sold. Reduce variable costs to 49% of sales 2. ty fhom locat Instructions (a) Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? Birchfield's management is looking at longer term solutions to improve net income. One of the options they have reviewed will increase fixed expenses by $27,500 while reducing variable expenses by $2 per unit. Management feels that with these changes the price of the product could be reduced by $1 per unit. The decrease in price will then result in an increase in unit sales of 5%. Compute the net income to be earned under this alternative. Do you recommend this option? Why or why not? (b) leverage for e 1525 000? fsatoty ra f tne's vice pres-ent 9

Number 5 Birchfield Company reports the following operating results for the month of February: Sales $900,000 (units 15,000); variable costs $472,500; and fixed costs $202,500. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 2.5% with no change in total variable costs or units sold. Reduce variable costs to 49% of sales 2. ty fhom locat Instructions (a) Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? Birchfield's management is looking at longer term solutions to improve net income. One of the options they have reviewed will increase fixed expenses by $27,500 while reducing variable expenses by $2 per unit. Management feels that with these changes the price of the product could be reduced by $1 per unit. The decrease in price will then result in an increase in unit sales of 5%. Compute the net income to be earned under this alternative. Do you recommend this option? Why or why not? (b) leverage for e 1525 000? fsatoty ra f tne's vice pres-ent 9

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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