Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon 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 Skin Crean 136,000 Relevant Information B ath 011 216,000 Color Gel 96.000 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (Kb) Variable costs ( a c ) Contribution margin Fixed costs Net Income $1,224,000 (272,000) 952,000 (777,000) $ 175,000 $1,512, (864,000) 648,000 (555.000) $ 93.000 $1,440,000 (960,000) 480,000 (160,000) $ 320,000 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? Complete this question by entering your answers in the tabs below. Reg A ReqB ReqC Reg D to E Determine the margin of safety as a percentage for each product. (Round your answer to whole percentage values Skin Cream b ath Color Gel Margin of safety Rega ReqB > Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon 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 136.000 216,000 Color Gel 96.ee 19 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 $1.224,00 (272,000) 952,000 (777,808) $ 175,000 $1,512,000 (864,000) 648,000 (555,000 $ 93,000 $1,440,000 (960,000) 480,000 (160,000) $ 320.000 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? Complete this question by entering your answers in the tabs below. Reg A ReqB Rea Reg D to E Prepare revised Income statements for each product, assuming a 20 percent increase in the budgeted sales volume. VERNON COMPANY Income Statements Skin Cream Bath Oil Color Gel Variable costs Contribution margin Fixed cost Net Income Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different opt a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the produ follow Relevant Information Skin Cream b ath Oil 136,00 216,000 Color Gel 96,000 15 10 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (a xb) Variable costs (a X c) Contribution margin Fixed costs Net income $1,224,000 (272,000) 952.000 277.000 $ 175,000 $1,512, eee (864.eee) 648,000 (555,000 $ 93,000 $1,440,000 (960.000) 480,000 (160,000) $ 320,000 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? Complete this question by entering your answers in the tabs below. Req A Regat Reg D to E 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.) Skin Cream b ath Oil Color Gel Percentage change in net income ReqB Req D to E > Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different opti a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the produ follow Relevant Information Skin Cream Bath Oil Color Gel 136.000 216,000 96.089 Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (axb) Variable costs (a X c) Contribution margin Fixed costs Net income $1,224, eee (272,000) 952,000 (277.000) $ 175,000 $1,512,800 (864,00) 648.000 (555,000 $ 93,000 $1,440.009 (960, 000) 480,000 160,000) $ 320,000 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? Complete this question by entering your answers in the tabs below. Req A Reg B Reqc Reg D to? 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?