Question
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,
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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