Ger Company reports the following operating results for the month of August: Sal

Question

Ger Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable costs $210,100; and fixed costs $71,600. Management is considering three independent courses of action to increase net income.

Compute the net income that would result from each of the independent actions below: (Round your answers to 0 decimal places, e.g. 52,500. When computing new selling price round your computation to 2 decimal places, e.g. 66.25 to arrive at the answer.)

1) INCREASE SELLING PRICE BY 10%
$________________________

2) REDUCE VARIABLE COSTS TO 51% OF SALES
$________________________

3) REDUCE FIXED COSTS BY $22,800.
$________________________

THE ANSWERS ARE NOT 330,000...153,000...AND...48,800....

Explanation / Answer

1) INCREASE SELLING PRICE BY 10% before selling price=300000/5000=60 per unit new selling price=60+10%=66 per unit sales=5000*66=330000 less variable cost=210100 less fixed cost=71600 net income=$48300 2) REDUCE VARIABLE COSTS TO 51% OF SALES sales=5000*60=300000 less variable cost=300000*51%=153000 less fixed cost=71600 net income=$75400 3) REDUCE FIXED COSTS BY $22,800. sales=5000*60=300000 less variable cost=210100 less fixed cost=(71600-22800)48800 net income=$41100

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