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xercise 19-3 Correct answer. Your answer is correct. Barnes Company reports the following operating results for the month of August: sales $320,000 (units 5,000); variable costs $216,000; and fixed costs $70,500. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. 1. Increase selling price by 10% with no change in total variable costs or sales volume. Net income $Entry field with correct answer 65500 2. Reduce variable costs to 56% of sales. Net income $Entry field with correct answer 70300 3. Reduce fixed costs by $22,000. Net income $Entry field with correct answer 55500

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Answer:

1.$352,000

2.$33,500

3. $227,500

Explanation:

1.

$320,000 x 10% = 32,000

$320,000 + $32,000= $352,000

2.

Reduce variable costs to 56% of sales.

$320,000 x 56%= $179,200

Sales $320,000 - VC $ 216,000= $104,000

CM $104,000 - FC $70,500 = $33,500

By reducing the variable costs to 56% of sales we would get a net income of $ 33,500

3.

Reduce fixed costs by $22,000.

Sales $320,000 - VC $ 22,000=$298,000

CM $298,000 - FC $70,500 = $227,500

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