Barnes Company reports the following operating results for the month of August: sales $315,000 (units 5,000); variable costs $225,000; and fixed costs $71,100. 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 56% of sales.
Net Income =
3) Reduce fixed costs by $21,000.
Net Income=
Which course of action will produce the highest net income?
Alternative1
Alternative2
Alternative3