Exercise 19-3 Your answer is partially correct. Try again. Barnes Company report
ID: 2525163 • Letter: E
Question
Exercise 19-3 Your answer is partially correct. Try again. Barnes Company reports the following operating results for the month of August: sales $325,000 (units 5,000) variable costs $215,000; and fixed costs $71,500. 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 46000 2. Reduce variable costs to 60% of sales Net income 71850 3. Reduce fixed costs by $21,000 Net income 59500 Altemative 2 Which course of action will produce the highest net income? Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT Question Attempts: 1 of 15 used SAVE FOR LATERSUBMIT ANSWERExplanation / Answer
Answers
Unit
per unit
Total Amount
Sales
5000
$ 65.00
$ 3,25,000.00
(-) Variable cost
5000
$ 43.00
$ 2,15,000.00
Contribution margin
5000
$ 22.00
$ 1,10,000.00
(-) Fixed Cost
$ 71,500.00
Net Income
$ 38,500.00
Unit
per unit
Total Amount
Sales
5000
$ 71.50 [$65 + 10%]
$ 3,57,500.00
(-) Variable cost
5000
$ 43.00
$ 2,15,000.00
Contribution margin
5000
$ 28.50
$ 1,42,500.00
(-) Fixed Cost
$ 71,500.00
Net Income [Answer]
$ 71,000.00
Current Net Income
$ 38,500.00
Increase (decrease) in Net Income
$ 32,500.00
Unit
per unit
Total Amount
Sales
5000
$ 65.00
$ 3,25,000.00
(-) Variable cost
5000
$ 39.00 [$65 x 60%]
$ 1,95,000.00
Contribution margin
5000
$ 26.00
$ 1,30,000.00
(-) Fixed Cost
$ 71,500.00
Net Income [Answer]
$ 58,500.00
Current Net Income
$ 38,500.00
Increase (decrease) in Net Income
$ 20,000.00
Unit
per unit
Total Amount
Sales
5000
$ 65.00
$ 3,25,000.00
(-) Variable cost
5000
$ 43.00
$ 2,15,000.00
Contribution margin
5000
$ 22.00
$ 1,10,000.00
(-) Fixed Cost
$ 50,500.00 [$71500 - $21000]
Net Income [Answer]
$ 59,500.00
Current Net Income
$ 38,500.00
Increase (decrease) in Net Income
$ 21,000.00
Unit
per unit
Total Amount
Sales
5000
$ 65.00
$ 3,25,000.00
(-) Variable cost
5000
$ 43.00
$ 2,15,000.00
Contribution margin
5000
$ 22.00
$ 1,10,000.00
(-) Fixed Cost
$ 71,500.00
Net Income
$ 38,500.00
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