Yams Company reports the following operating results for the month of August: sales $400,000 (units 5000), variable costs $240,000, and fixed costs $90,000. Management is considering the following independent courses of action to increase net income.
- Increase selling price by 10% with no change in total variable costs or units sold.
- Reduce variable costs to 55% of sales
Instructions
Compute the net income to be earned under each alternative. Which courses of action will produce the higher net income?
Solution
