Answer:
Explanation:
Selling price per unit = $300000 / 5000 units = $60 per unit
Increase in selling price by 10% = $60 + $60*10% = $60 + $6 = $66
1. Sales (5000 units * $66) $330000
less: variable expenses ($222000)
Contribution margin $108000
less: fixed cost ($71900)
Net income = $36100
2. If variable cost is reduced to 60% of sales
Sales $300000
less: variable cost (reduce 60%) ($180000)
Contribution margin $120000
less: fixed cost ($71900)
Net income = $48100
3. If fixed cost is reduced to $19000
Sales $300000
less: variable cost ($222000)
Contribution margin $78000
less: fixed cost (reduce by $19000) ($52900)
Net income = $25100
Actual net income is $6100 ( sales $300000 - variable cost $222000 - Fixed cost $71900)
Case 1 : increasing the price will lead to an increase in the net income from $6100 to $36100
Case 2 : Reducing the variable cost will lead to an increase in the net income from $6100 to $48100
Case 3 : Reducing the fixed cost will lead to an increase in the net income from $6100 to $25100.
