11-28 Inman Manufacturing company makes a product that it sells for $60 per unit. The company incurs variable manufacturing costs of $24 per unit. Variable selling expenses are 512 per unit, annual fixed manufacturing costs are 5189,000, and fixed selling and administrative costs are S141,000 per year. Required Determine the break-even point in units and dollars using the following approaches. a. Equation method. b. Contribution margin per unit. C. Contribution margin ratio. d. Confirm your results by preparing a contribution margin income statement for the break. even sales volume. Problem 11-29 Margin of safety and operating leverage Santiago 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 infor. mation and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income Statements Sales revenue (a X b) Variable costs (a X c) Contribution margin Fixed costs Net income 50,000 $7.00 $4.00 90.000 $4.00 $1.50 30.000 $13.00 $ 9.00 $350.000 (200,000) 150.000 (120,000) $ 30.000 $360,000 (135,000) 225.000 (210,000) $390.000 (270,000) 120.000 (104,000) $ 15.000 $ 16.000 De fl DO 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. C. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. Which product has the highest operating leverage? d. Assuming that management is pessimistic and risk averse, which product should the com- pany add to its cosmetic line? Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line