Answer:
$14,200
$44,200
$63,200
$37,200
Explanation:
As per the data given in the question,
Presentation of profitability Statement
Particulars Amount Per unit
Sales $300,000 $60 ($300,000÷5,000)
Less: Variable cost $214,000
Contribution $86,000
Less: Fixed cost $71,800
Net income $14,200
Alternative 1 : increase selling price by 10%
Presentation of profitability Statement
Particulars Amount
Sales ($60+10% of $60) × 5,000 $330,000
Less: Variable cost $214,000
Contribution $116,000
Less: Fixed cost $71,800
Net income $44,200
Alternative 2 : reduce variable cost to 55% sales
Presentation of profitability Statement
Particulars Amount
Sales $300,000
Less: Variable cost(300,000×55%) $165,000
Contribution $135,000
Less: Fixed cost $71,800
Net income $63,200
Alternative 3 : reduce fixed cost by 23,000
Presentation of profitability Statement
Particulars Amount
Sales $300,000
Less: Variable cost $214,000
Contribution $86,000
Less: Fixed cost($71,800-$23,000) $48,800
Net income $37,200
Therefore alternative 2 produced highest net income.
