Finch 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) 112,000 192,000 72,000 Expected sales price (b) $ 9 $ 5 $ 12 Variable costs per unit (c) $ 2 $ 2 $ 7 Income statements Sales revenue (a × b) $ 1,008,000 $ 960,000 $ 864,000 Variable costs (a × c) (224,000 ) (384,000 ) (504,000 ) Contribution margin 784,000 576,000 360,000 Fixed costs (525,000 ) (375,000 ) (100,000 ) Net income $ 259,000 $ 201,000 $ 260,000 Required:
a. Determine the margin of safety as a percentage for each product. b. Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. c1. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. c2. Which product has the highest operating leverage? d. Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? e. Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?
Answer with working is given below
Finch Company is considering the addition of a new product to its cosmetics line. The company...
Finch 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. Determine the margin of safety as a percentage for each product. Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. For each product, determine the percentage change...
Jordan 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 120,000 10 2 Bath Oil 200,000 6 Color Gel 80,900 13 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (a x...
Zachary 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 01:17:09 Relevant Information Skin Cream Bath oil Color Gel 140,000 220,000 100,000 $ 7 $ 7 $ 15 $ 2 $ 4 $ 11 Budgeted sales in units (a) Expected sales price (6) Variable costs...
Stuart 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) 132,000 212,000 92,000 Expected sales price (b) $ 7 $ 7 $ 14 Variable costs per unit (c) $ 2 $ 4...
Stuart 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 Bath Oil 212,000 Skin Cream Color Gel 92,000 14 10 Budgeted sales in 132,000 units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (a 2 4 $...
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Walton 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. Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (a x b) Variable costs (ax c) Contribution margin Fixed costs Net income Relevant Information Skin Cream...
Jordan 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 120,000 200,000 80,000 9 $ 6 $ 13 2. 3 $ 8 to ta AtA Budgeted sales in units (a) Expected sales price (b) Variable costs per...
Walton 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 138,000 218,000 10 2 Color Gel 98,000 16 10 Budgeted sales in units (a) Expected sales price (6) Variable costs per unit (c) Income statements Sales revenue (a x...
Stuart 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 Skin Cream 132,000 Relevant Information Bath oil 212,000 Color Gel 92,000 14 10 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (a x b) Variable...