Differential Analysis for Sales Promotion Proposal

L'Essence Cosmetics Company is planning a one-month campaign for June to promote sales of one of its two cosmetics products. A total of $97,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

		Moisturizer		Perfume
Unit selling price		$50		$55
Unit production costs:
	Direct materials	$ 9		$12
	Direct labor	3		4
	Variable factory overhead	2		3
	Fixed factory overhead	5		6
	Total unit production costs	$19		$25
Unit variable selling expenses		16		15
Unit fixed selling expenses		9		6
	Total unit costs	$44		$46
Operating income per unit		$ 6		$ 9

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 23,000 additional units of moisturizer or 19,000 additional units of perfume could be sold without changing the unit selling price of either product.

Required:

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1. Prepare a differential analysis as of June 15, 2014, to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter zero "0".

Moisturizer Perfume McAfee Unit selling price $50 $55 Unit production costs: Direct materials $9 $12 Direct labor Variable factory overhead Fixed factory overhead $25 Total unit production costs $19 Unit variable selling expenses 15 16 Unit fixed selling expenses $44 Total unit costs $46 Operating income per unit 6 9 No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 23,000 additional units of moisturizer or 19,000 additional units of perfume could be sold without changing the unit selling price of either product. Required Hide 1. Prepare a differential analysis as of June 15, 2014, to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2 If an amount is zero, enter zero "0". Differential Analysis Promote Moisturizer (Alt. 1)or Promote Porfumo (Alt. 2) June 15, 2014 Promote Moisturizer (Alternative 1) Promote Perfume (Alternative 2 Differential Effect on Income (Alternative 2 Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling expenses. Sales promotion Income (Loss)