Number 5 Birchfield Company reports the following operating results for the month of February: sales $900,000 (units 15,000); variable costs $472,500, and Tixed costs $202,500. Management is considering the following independent courses of action to increase net income Increase selling price by 2.5% WIth no change in total variable costs or units sold 1. 2 Reduce variable costs to 49% of sales. Instructions Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? (а) Sydtotm $250 Birchfield's management is looking at longer term solutions to improve net income One of the options they have reviewed will increase fixed expenses by $27,500 while reducing variable expenses by $2 per unit. Management feels that with these changes the price of the product could be reduced by $1 per unit. The decrease in price will then result in an increase in unit sales of 5%. Compute the net income to be earned under this alternative. Do you recommend this option? Why or why not? (b) brating. nd by 260 0C0T rgin of uniety ralio, det (C) arce Tasty Des (4) ver 0de Set LO0 62.90 150 0 31000 Satet ate Flre the degree of oper 50.0007 could ths oplion ty on do you for Tacy Cal teria?

Question
Number 5
Birchfield Company reports the following operating results for the month of February: sales
$900,000 (units 15,000); variable costs $472,500, and Tixed costs $202,500. Management is
considering the following independent courses of action to increase net income
Increase selling price by 2.5% WIth no change in total variable costs or units sold
1.
2
Reduce variable costs to 49% of sales.
Instructions
Compute the net income to be earned under each alternative. Which course of action
will produce the highest net income?
(а)
Sydtotm
$250
Birchfield's management is looking at longer term solutions to improve net income One
of the options they have reviewed will increase fixed expenses by $27,500 while
reducing variable expenses by $2 per unit. Management feels that with these changes
the price of the product could be reduced by $1 per unit. The decrease in price will then
result in an increase in unit sales of 5%. Compute the net income to be earned under
this alternative. Do you recommend this option? Why or why not?
(b)
brating.
nd by 260 0C0T
rgin of uniety ralio, det
(C)
arce
Tasty
Des
(4)
ver
0de
Set
LO0
62.90
150 0
31000
Satet
ate
Flre
the degree of oper
50.0007
could ths oplion
ty
on do you
for Tacy
Cal
teria?
Expand
Transcribed Image Text

Number 5 Birchfield Company reports the following operating results for the month of February: sales $900,000 (units 15,000); variable costs $472,500, and Tixed costs $202,500. Management is considering the following independent courses of action to increase net income Increase selling price by 2.5% WIth no change in total variable costs or units sold 1. 2 Reduce variable costs to 49% of sales. Instructions Compute the net income to be earned under each alternative. Which course of action will produce the highest net income? (а) Sydtotm $250 Birchfield's management is looking at longer term solutions to improve net income One of the options they have reviewed will increase fixed expenses by $27,500 while reducing variable expenses by $2 per unit. Management feels that with these changes the price of the product could be reduced by $1 per unit. The decrease in price will then result in an increase in unit sales of 5%. Compute the net income to be earned under this alternative. Do you recommend this option? Why or why not? (b) brating. nd by 260 0C0T rgin of uniety ralio, det (C) arce Tasty Des (4) ver 0de Set LO0 62.90 150 0 31000 Satet ate Flre the degree of oper 50.0007 could ths oplion ty on do you for Tacy Cal teria?

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