Question - Giesen Company reports the following operating results for the month of August: Sales $300,000 (units 5,000); variable costs $210,000; and fixed costs $70,000. Management is considering three independent courses of action to increase net income.
Compute the net income that would result from each of the independent actions below:
1. Increase selling price by 10% with no change in total variable costs.
2. Reduce variable costs to 58% of sales.
3. Reduce fixed costs by $20,000.
Which course of action will produce the highest net income?