Question

Bramble Company reports the following operating results for the month of August: sales $325,000 (units 5,000); variable costs $212,000; and fixed costs $70,400. 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 60% of sales. Net income $ 3. Reduce fixed costs by $18,000. Net income $ Which course of action will produce the highe

Answer 1

See below

Step-by-step explanation:

Given the above information,

1. Increase selling price by 10% with no change in total variable costs or variable cost

Net income = Sales - Variable cost - Fixed cost -

10% increase in selling price = $325,000 × 10% = $357,500

Net profit = $357,500 - $212,000 - $70,400

Net profit = $75,100

2. Reduce variable costs to 60% of sales

Variable costs = $325,000 × 60% = $195,000

Net profit = Sales - Variable costs - Fixed costs

Net profit = $325,000 - $195,000 - $70,400

Net profit = $59,600

3. Reduce fixed costs by $18,000

Net profit = Sales - Variable costs - Fixed costs

Net profit = $325,000 - $212,000 - $18,000

Net profit = $95,000