Question

RCES Exercise 19-3 nt Barnes Company reports the following operating results for the month of August: sales $315,000 (units 5,000); variable costs $218,000; and fixed costs $70,000. 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 $ Study 2. Reduce variable costs to 60 % of sales. Net income $1 3. Reduce fixed costs by $23,000. Net income Which course of action will produce the highest net income? Open Show Work Click if you would like to Show Work tr this question: LINK TO TEXT Version 4 John Wiley & Sons. Inc. All Rights Reserved. A Division of John Wiley & Sons, Inc I S 2000-2019 Privacy Policy ent

Answer 1

	SOLUTION : 1
	INCRASE IN SELLING PRICE BY 10%
	Sales ($ 315,000 X 110%)	$                  3,46,500
	Less: Variable Cost	$                  2,18,000
	Less: Fixed Cost	$                      70,000
	Net Income	$                      58,500
	SOLUTION : 2
	REDUCE VARIABLE COSTS TO 60% OF SALES
	Sales	$                  3,15,000
	Less: Variable Cost (60% OF $ 315,000)	$                  1,89,000
	Less: Fixed Cost	$                      70,000
	Net Income	$                      56,000
	SOLUTION : 3
	REDUCE FIXED COST BY $ 23,000
	Sales	$                  3,15,000
	Less: Variable Cost	$                  2,18,000
	Less: Fixed Cost ($ 70,000 - $ 23,000)	$                      47,000
	Net Income	$                      50,000
	HIGHEST INCOME IS GENERATED IN OPTION : 1