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Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and

Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product.

Askin Bskin Total
Sales $ 4,000,000 $ 2,600,000 $ 6,600,000
Cost of goods sold (2,600,000 ) (2,100,000 ) (4,700,000 )
Gross profit $ 1,400,000 $ 500,000 $ 1,900,000
Research and development (1,170,000 )
Selling expenses (130,000 )
Profit before taxes $ 600,000

Seventy-five percent of the research and development and selling expenses were traceable to Askin. Profit before taxes for the Askin product, per life-cycle income statements, is:

Multiple Choice

$522,500.

$425,000.

$175,000.

$332,500.

$207,500.

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