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. 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 Req A Req B Margin of safety Skin Cream Skin Cream 112, 000 $ $ Req C % Relevant Information Bath Oil 192, 000 5 2 $1,008,000 (224, 000) 784,000 (525, 000) $ 259,000 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? 9 2 Complete this question by entering your answers in the tabs below. Bath Oil Req D to E % $ $ 960,000 (384, 000) 576, 000 (375, 000) $ 201,000 Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.) < Req A Color Gel 72,000 12 7 Color Gel $ $ 864,000 (504, 000) 360,000 (100, 000) $ 260,000 % Req B > Req A Req B Sales revenue Variable costs Contribution margin Fixed cost Net income Req C Req D to E Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. FINCH COMPANY Income Statements Skin Cream Bath Oil < Req A Color Gel Req C > Req A Req B Req C Percentage change in net income 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.) Req D to E Skin Cream % Bath Oil < Req B Color Gel Req D to E > Req A Req B Req C Req D to E Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line? < Req C Req D to E >