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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.
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Relevant Information |
|||||||||||
| Â |
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 |
 |  |
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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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