Cottonwood Company reports the following operating results for the month of Augu

Question

Cottonwood Company reports the following operating results for the month of August: sales $361,900 (units 5,170); variable costs $220,000; and fixed costs $97,570. Management is considering the following independent courses of action to increase net income. Compute the net income to be earned under each alternative. (Round intermediate calculations to 2 decimal places, e.g. 2.25 and final answers to o decimal places, e.g. 12,125.) Which course of action will produce the highest net income? Click if you would like to Show Work for this question:

Explanation / Answer

By bringing the variable cost down to 55% of sales wil bring the highest net income of $ 65285

current ALT 1 ALT 2 no of units sold 5170 5170 5170 Sales 361900 408947 361900 variable cost -220000 -199045 fixed cost -97570 -97570 -97570 net income 44330 311377 65285

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