(Answered) Problemyams company reports the following operating results

Accounting

Problem

Yams Company reports the following operating results for the month of August: sales $400,000 (units 5,000), variable costs $240,000, and fixed costs $90,000. Manage¬ment is considering the following independent courses of action to increase net income.

1. Increase selling price by 10% with no change in total variable costs or units sold.
2. Reduce variable costs to 55% of sales.

Instructions

Compute the net income to be earned under each alternative. Which course of action will produce the higher net income?

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