Smith Engine Company manufactures and sells diesel engines for use in small farming equipment. For its
budget, Smith Engine Company estimates the following:
Click the icon to view the budget data.
The firstquarter income statement, as of March reported that sales were not meeting expectations. During the
first quarter, only units had been sold at the current price of $
The income statement showed that variable and fixed costs were as planned, which meant that the
annual net income projection would not be met unless management took action. A management committee
was formed and presented the following mutually exclusive alternatives to the president:
iClick the icon to view the alternatives.
Read the requirements.
Requirement Determine which alternative Smith Engine should select to achieve its net income objective. Show your calculations.
Evaluate each of the alternatives presented by the management committee, begin with alternative a
Alternative
a
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income
Income taxes
Net income
