Exercise 1115 Concord Company reports the following operatin

Exercise 11-15

Concord Company reports the following operating results for the month of August: sales $387,600 (units 5,100), variable costs $256,000, and fixed costs $93,000. 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 66% 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?

$\"\"$ Alternative 1Alternative 2

Answer

1. Increase selling price by 14% with no change in total variable costs or sales volume.
Sales ($387,600 x 1.14)	$441,864
Less:Variable Cost	-$256,000
Contribution Margin	$185,864
Less: Fixed Cost	-$93,000
Net Income	$92,864

2.Reduce variable costs to 66% of sales.
Sales	$387,600
Less:Variable Cost ($387,600 x 66%)	-$255,816
Contribution Margin	$131,784
Less: Fixed Cost	-$93,000
Net Income	$38,784

Option 1 Increase selling price by 14% will increase net income

Exercise 11-15 Concord Company reports the following operating results for the month of August: sales $387,600 (units 5,100), variable costs $256,000, and fixe

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