Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line...
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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 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:
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