Question

Yams Company reports the following operating results for the month of August: sales $370,000 (units 5,000), variable costs $257,000, and fixed costs $95,000. Management is considering the following independent courses of action to increase net income.

1.		Increase selling price by 11% with no change in total variable costs or units sold.
2.		Reduce variable costs to 61% of sales.

Compute the net income to be earned under each alternative. (Round intermediate calculations to 2 decimal places e.g. 2.25 and final answer to 0 decimal places, e.g. 12,125.)

Answer 1

D Total Sales (5000 Units) Varaible Expense Contribution Margin Fixed Expenses Net operating Income F Per unit 370000 257000 113000 95000 18000 74 51.4) 22.61 Selling Price increase by 11% Contribution Income statement Total Per unit Sales (5000 Units) 410700 Varaible Expense 257000 Contribution Margin 153700 Fixed Expenses 95000 Net income 58700 Answer 82.14 51.40 30.74 - 2 Reduce varaible cost to 61% of sales Contribution Income statement Total Per unit Sales (5000 Units) 370000 Varaible Expense 225700 Contribution Margin 144300 Fixed Expenses 95000 Net income 49300 Answer 74.00 45.14 28.86