Kimmel, Accounting, 6e Help I System Announcements CALCULATOR PRINTER VERSION BA

Question

Kimmel, Accounting, 6e Help I System Announcements CALCULATOR PRINTER VERSION BACK Exercise 19-3 Bames Company reports the following operating results for the month of August: sales $300,000 (units 5,000); variable costs $225,000; and fixed costs $71,400. Managenent is considering the following independent courses of action to increase net income Compute the net income to be eamed under each altemative. 1. Increase seling price by 10% with no change in total vanable costs or sales volume. Net income 2. Reduce vanable costs to 56% of sales. Net incomes 3. Reduce fixed costs by $24,000 Net incomes Which course of action will produce the highest net income? Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT

Explanation / Answer

Exercise 19-3 1) INCOME STATEMENT Particulars Amount($) Sales( 5000*$66) 330000 Less: Variable cost 225000 Contribution margin(330000-225000) 105000 Less: Fixed Cost 71400 Net Income 33600.00 So net income is $33600 Working: Selling price= 300000/5000= $60 New selling price= 60*1.1=$66 2) INCOME STATEMENT Particulars Amount($) Sales 300000 Less: Variable cost(300000*0.56) 168000 Contribution margin(300000-168000) 132000 Less: Fixed Cost 71400 Net Income 60600.00 So net income is $60600 3) INCOME STATEMENT Particulars Amount($) Sales 300000 Less: Variable cost 225000 Contribution margin(300000-225000) 75000 Less: Fixed Cost(71400-24000) 47400 Net Income 27600.00 So net income is $27600

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