Larue Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable costs $210,000; and fixed costs $70,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 65% of sales.
3. Reduce fixed costs by $10,000.
Instructions
Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?

Question

Quizplus · Accepted Answer

The Answer of Larue Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable costs $210,000; and fixed costs $70,000. Management is considering the following independent courses of action to increase net income.
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 65% of sales.
3. Reduce fixed costs by $10,000.
Instructions
Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?

Larue Company Reports the Following Operating Results for the Month