1 answer

Sandhill Company reports the following operating results for the month of August: sales $382,500 (units 5,100),...

Question:

Sandhill Company reports the following operating results for the month of August: sales $382,500 (units 5,100), variable costs $245,000, and fixed costs $98,000. Management is considering the following independent courses of action to increase net income.

1. Increase selling price by 16% with no change in total variable costs or units sold.
2. Reduce variable costs to 59% of sales.

Compute the net income to be earned under each alternative.

1. Net Income

$enter a dollar amount

2. Net Income

$enter a dollar amount

Which course of action will produce the higher net income? select an option


Answers

1
Sales 443700 =382500*1.16
Less: Variable expenses 245000
Less: Fixed expenses 98000
Net Income 100700
2
Sales 382500
Less: Variable expenses 225675 =382500*59%
Less: Fixed expenses 98000
Net Income 58825
3
Option 1 will produce the higher net income
.

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