A company is able to implement one of two strategies regarding a particular product: hire a marketing firm to increase sales 18% or assign a product procurement manager who can reduce material cost for the product by 5%. Currently, the product has sales of $10,700,000. The costs of materials are $7,700,000, labor costs are $1,450,000 and overhead costs are $800,000. What are the effects on net income of the two alternative strategies?
The change in net income after the 18% increase in sales is?
The change in net income due to the reduction in material costs is?
Based on the change in net income, the company should ?