Fanning Company is considering the addition of a new product to its cosmetics line. The...
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Accounting
Fanning 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.
Determine the margin of safety as a percentage for each product
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.)
Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 110,000 190,000 70,000 Expected sales price (b) $ 8 $ 4 $ 11 Variable costs per unit (c) $ 2 $ 2 $ 7 Income statements Sales revenue (a b) $ 880,000 $ 760,000 $ 770,000 Variable costs (a c) (220,000 ) (380,000 ) (490,000 ) Contribution margin 660,000 380,000 280,000 Fixed costs (432,000 ) (240,000 ) (76,000 ) Net income $ 228,000 $ 140,000 $ 204,000
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