Sunland Company reports the following operating results for the month of August: sales $300,000 (units 5,000); variable costs $223,000; and fixed costs $70,800. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net income 2. Reduce variable costs to 56% of sales. Net income $ 3. Reduce fixed costs by $18,000. Net income Senter a net income if the fixed costs are reduced by $18,000 Which course of action will produce the highest net income?
Sunland Company reports the following operating results for the month of August: sales $300,000 (units 5,000); variable costs $223,000; and fixed costs $70,800. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net income 2. Reduce variable costs to 56% of sales. Net income $ 3. Reduce fixed costs by $18,000. Net income Senter a net income if the fixed costs are reduced by $18,000 Which course of action will produce the highest net income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sunland Company reports the following operating results for the month of August: sales $300,000 (units 5,000); variable costs
$223,000; and fixed costs $70,800. Management is considering the following independent courses of action to increase net income.
Compute the net income to be earned under each alternative.
1. Increase selling price by 10% with no change in total variable costs or sales volume.
Net income
2. Reduce variable costs to 56% of sales.
Net income
$
3. Reduce fixed costs by $18,000.
Net income
Senter a net income if the fixed costs are reduced by $18,000
Which course of action will produce the highest net income?
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