Solomon 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 get. Relevant information and budgeted annual income statements for each of the products follow Relevant information Skin Crean Bath oil Color Gel 190,000 210.000 30,000 10 15 Budgeted sales in units) Txpected sales price tb) Variable cooper wit 1) Incatatements le revenue. ) Variableta (O) Contribution in Tixed costs et in $1,300,000 (260.000 1.040.000 BIG.000) $ 224.000 11.050.000 (140,000 1,050,000 (250.000) $ 200,000 53.350.000 (810.000) 540,000 120,000) $ 155,000 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. c1. For each product determine the percentage change in net income that results from the 20 percent increase in sales c2. Which product has the highest operating leverage? d. Assuming that management is pessimistic and risk overse, which product should the company add to its cosmetics line? e Assuming that management is optimistle 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 Rec Rect Reg C2 to E 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. c1. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. c2. Which product has the highest operating leverage? 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 Reg CI Reg C2 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 % F ReqB> 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. c1. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. c2. Which product has the highest operating leverage? 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. ReqA Req ReqC1 Reg C2 to E Prepare revised Income statements for each product, assuming a 20 percent increase in the budgeted sales volume. SOLOMON COMPANY Income Statements Skin Cream Bath Ou Color Gel Sales revenue Variable costs Contribution margin Feed cost $ 0 $ 0$ 5 Not income 0$ 0 $ 0 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. c1. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. c2. Which product has the highest operating leverage? 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 Req ci Reg C2 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& Req C2 to E > Complete this question by entering your answers in the tabs below. Req A Req ReqC1 Reg C2 to E c2. Which product has the highest operating leverage? 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? d 02. Which product has the highest operating leverage? 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?
