Differential Analysis for Sales Promotion Proposal

Raisa Cosmetics Company is planning a one-month campaign for March to promote sales of one of its two cosmetics products. A total of $200,000 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:

Line Item Description	Moisturizer	Perfume
Unit selling price	$15	$24
Unit production costs:
Direct materials	$(2)	$(4)
Direct labor	(2)	(4)
Variable factory overhead	(1)	(2)
Fixed factory overhead	(2)	(6)
Total unit production costs	$(7)	$(16)
Unit variable selling expenses	(1)	(2)
Unit fixed selling expenses	(1)	(3)
Total unit costs	$(9)	$(21)
Operating income per unit	$6	$3

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 75,000 additional units of moisturizer or 60,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product.

Required:

Question Content Area

1. Prepare a differential analysis as of February 17 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2) February 17

Line Item Description	Promote Moisturizer (Alternative 1)	Promote Perfume (Alternative 2)	Differential Effects (Alternative 2)
Revenues
Costs:
Direct materials
Direct labor
Variable factory overhead
Variable selling expenses
Sales promotion
Profit (loss)