Vera Bradley Inc. reports the following results for the month of June: Sales Revenue (20,000 units)
Question:
Vera Bradley Inc. reports the following results for the month of June:
Sales Revenue (20,000 units) $1,200,000
Variable costs 800,000
Fixed costs 300,000
Net income $ 100,000
Management of Vera Bradley has been assessing possible course of action and have developed the following independent scenarios to pursue:
1. Reduce variable costs to 63% of sales.
2. Reduce fixed costs by $30,000.
3. Increase selling price by 4% with no change in total variable costs.
Instructions
Vera Bradley would like to select the scenario that would result in the
highest net income. Which scenario would you recommend and why? You must
show computations for each one and then state your conclusion.
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu