Explore BrainMass

Evaluating Two Alternatives to Raise Net Income

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Company reports the following operating results for the month of August: Sales $350,000 (units 5,000); variable costs $210,000; and fixed costs $90,000. 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 55% of sales.

Compute the net income to be earned under each alternative.

Which course of action will produce the highest net income?

© BrainMass Inc. brainmass.com March 21, 2019, 11:19 pm ad1c9bdddf

Solution Preview

Sales = 350,000
Total Costs = 210,000 + 90,000 = 300,000
Net income = 350,000 - 300,000 = ...

Solution Summary

This solution uses algebra to calculate which of two alternatives will produce the higher net income.