Problem 11-29 Margin of safety and operating leverage LO 11-6 Gibson 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 Bath Oil Skin Cream 116,000 Color Gel Budgeted sales in units (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (ax b) Variable costs (ax c) Contribution margin Fixed costs Net income 196,000 76,000 12 $ 812,000 (232,000) 580,000 $1,176,000 $912,000 304,000 $ 216,000 (588,000) 588,000 (608,000) (405,000(88,000) $ 175,000 183,000 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 Req B Req C Req D to E Req A Req B Req C Reg D to E Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.) Skin Cream Bath Oil Color Gel Margin of safety Req Req A Req B Req C Req D to E Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume GIBSON COMPANY Income Statements Skin Cream Bath Oil Color Gel Sales revenue Variable costs Contribution margin Fixed cost Net income ReqA Req C ) Complete this question by entering your answers in the tabs below. Req A Req B Req C | Req 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 Bath Oil Color Gel Percentage change in net income Req B Req D to E> Complete this question by entering your answers in the tabs below 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