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Norton Company

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Norton Company reports the following operating results for the month of August:
sales $310,000 (units 5,000); variable costs $210,000; and fixed costs $75,000. Management
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 sales volume.
2. Reduce variable costs to 58% of sales.
3. Reduce fixed costs by $20,000.

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

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