Question

Exercise 19-03 Your answer is partially correct. Try again. Barnes Company reports the following operating results for the month of August: sales $320,000 (units 5,000); variable costs $216,000; and fixed costs $70,500. 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 $22,000. Net Income Which course of action will produce the highest net income? Alternative 2

Answer 1

Exercise 19-03:- Solutions D Net Income $65,500 Explanation $352,000 $(216,000) $1361000 $(10,500) $ 65,500 sales($320,000 +10.1.) Less: Variable cost Contribution Margin Less: Fixed cost ... NEE Income 2) Net Income = $10,300 Explanation sales Less: variable cost ($320,000 x 56:)) . . contribution Margin Less:- Fixed cost Net Income $ 320,000 $1179,200) $100,800 $.(10,500) $70,300

: . 3) Net Income 255.500. Explanation: sales $320,000 Less: variable cost $(216,000) contribution margin $ 10410oo Less: Fixed cost ($70,500 -$221000) $ (48,500) Net Income . .. $ 55,500 In Alternative 2 the Net Income is $70,300. Thus Alternative. I will produce the highest Net Income

Exercise 19-06- solutions Lawnmowers Weed-trimmers Chainsaws ... .= 30.000 units .= 75,000 units . 45.000 units Explanation - Leotton Sales mix percentage cas 201. 50% . lawnmowers Weed-trimers Chainsaws contribution weighted Average/ Mergin per unit contribution Margin (b) (6=axb) $34 $6.8 $23 . $115 $37 . $111 30). $29.4

Total Break even sales in units fixed cost weighted Average contribution Mergin S . : $hiV10,000 $29.0 = 150,000 units sales units needed per product is as follows Sales Mix Total Break.. sales units percentage even sales .. . Needed - in units .. per product (b) Lawnmowers (cu axb) 150,000 . 30000 whils Weed-trimmers 507 : 150,000 75000 units Chain saws 30:1. 150,000 45,000 vhils 150,000 units 20).

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