Barnes Company reporthe following operating esults for the month o August sales

Question

Barnes Company reporthe following operating esults for the month o August sales S300.000 units 5.000 ; variable costs s225 000; and fixed costs S71 400 Management ' considering the following independent courses of action to increase net income compute the net income to be earnad under .ch alternabV.. 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 s 3. Reduce fixed costs by $24,000 Net income Which course of action will produce the highest net income?

Explanation / Answer

1 Net income=(300000*1.1)-225000-71400= $33600 2 Net income=300000-(300000*56%)-71400= $60600 3 Net income=300000-225000-(71400-24000)= $27600 Alternative 2 will produce higher net income

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