Norton company reports the following operating results for the month of August:

Question

Norton company reports the following operating results for the month of August: sales $310,000 (units 5,000); variable costs $210,000; and fixed costs $75,000.                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?

Explanation / Answer

1st 56000

2nd 55200

3rd 45000

1st will produce the highest income

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