Yams Company reports the following operating results for the month of August: sa

Question

Yams Company reports the following operating results for the month of August: sales $350,400 (units 4,800), variable costs $251,000, and fixed costs $96,000. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 14% with no change in total variable costs or units sold. 2. Reduce variable costs to 67% of sales. Compute the net income to be earned under each alternative. (Round intermediate calculations to 2 decimal places e.g. 2.25 and final answer to 0 decimal places, e.g. 12,125.) 1. Net Income $ 2. Net Income $ Which course of action will produce the higher net income? Click if you would like to Show Work for this question:

Explanation / Answer

1 Sales 399456 Variable expenses 251000 Contribution margin 148456 Fixed expenses 96000 Net Income 52456 2 Sales 350400 Variable expenses 234768 Contribution margin 115632 Fixed expenses 96000 Net Income 19632 Alternative 1 will produce the higher net income

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