Giesen Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable

Question:

Giesen Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable costs $210,000; and fixed costs $70,000. 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 or sales volume.
2. Reduce variable costs to 58% of sales.
3. Reduce fixed costs by $20,000.

Instructions
Compute the net income to be earned under each alternative. Which course of action will produce the highest net income?

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Managerial Accounting Tools for business decision making

ISBN: 978-0470477144

5th edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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