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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
3. Rundle Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow.
|
Relevant Information |
||||||||||||
|
Skin Cream |
Bath Oil |
Color Gel |
||||||||||
|
Budgeted sales in units (a) |
126,000 |
206,000 |
86,000 |
|||||||||
|
Expected sales price (b) |
$ |
8 |
$ |
6 |
$ |
13 |
||||||
|
Variable costs per unit (c) |
$ |
2 |
$ |
4 |
$ |
9 |
||||||
|
Income statements |
||||||||||||
|
Sales revenue (a × b) |
$ |
1,008,000 |
$ |
1,236,000 |
$ |
1,118,000 |
||||||
|
Variable costs (a × c) |
(252,000 |
) |
(824,000 |
) |
(774,000 |
) |
||||||
|
Contribution margin |
756,000 |
412,000 |
344,000 |
|||||||||
|
Fixed costs |
(576,000 |
) |
(320,000 |
) |
(108,000 |
) |
||||||
|
Net income |
$ |
180,000 |
$ |
92,000 |
$ |
236,000 |
||||||
Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.)
|
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For each product, determine the percentage change in net income that results from the 20 percent increase in sales. (Round your answers to whole percentage values.)
|
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