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Jordan 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. 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 Req A Req B Margin of safety Relevant Information Skin Cream Bath Oil 120,000 200,000 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 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? Req C1 Skin Cream Complete this question by entering your answers in the tabs below. $1,080,000 % $9 $2 $1,200,000 $1,040,000 (240,000) (600,000) (640,000) 840,000 600,000 400,000 (609,000) (435,000) (120,000) $231,000 $165,000 $280,000 Determine the margin of safety as a percentage for each product. Note: Round your answers to whole percentage values. Req C2 to E Bath Oil < $6 $3 % Req A Color Gel 80,000 $13 $8 Color Gel % Req B >

Jordan 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. 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 Req A Req B Margin of safety Relevant Information Skin Cream Bath Oil 120,000 200,000 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 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? Req C1 Skin Cream Complete this question by entering your answers in the tabs below. $1,080,000 % $9 $2 $1,200,000 $1,040,000 (240,000) (600,000) (640,000) 840,000 600,000 400,000 (609,000) (435,000) (120,000) $231,000 $165,000 $280,000 Determine the margin of safety as a percentage for each product. Note: Round your answers to whole percentage values. Req C2 to E Bath Oil < $6 $3 % Req A Color Gel 80,000 $13 $8 Color Gel % Req B >

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 42E: Sales Revenue Approach, Variable Cost Ratio, Contribution Margin Ratio Arberg Companys controller...
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G http... hapter Review i My... Budgeted sales in units (a) Expected sales price (b) I Variable costs per unit (c) Income statements Sales revenue (a x b) Variable costs (a x c) Contribution margin Fixed costs Net income Req A Tra... Margin of safety Req B Man..... Jordan 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 Cream Req C1 Relevant Information Skin Cream Bath Oil 120,000 200,000 $9 $2 $1,080,000 % M Questio... Complete this question by entering your answers in the tabs below. $1,200,000 $1,040,000 (240,000) (600,000) (640,000) 840,000 600,000 400,000 (609,000) (435,000) (120,000) $231,000 $165,000 $280,000 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? $6 $3 Req C2 to E Determine the margin of safety as a percentage for each product. Note: Round your answers to whole percentage values. Bath Oil 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? < Req A b Ans.... Color Gel 80,000 $13 $8 Color Gel % Bes... Req B > ezto.mheducation.com Saved < Prev US.... fron.... 3 of 5 Next > win.
Transcribed Image Text:G http... hapter Review i My... Budgeted sales in units (a) Expected sales price (b) I Variable costs per unit (c) Income statements Sales revenue (a x b) Variable costs (a x c) Contribution margin Fixed costs Net income Req A Tra... Margin of safety Req B Man..... Jordan 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 Cream Req C1 Relevant Information Skin Cream Bath Oil 120,000 200,000 $9 $2 $1,080,000 % M Questio... Complete this question by entering your answers in the tabs below. $1,200,000 $1,040,000 (240,000) (600,000) (640,000) 840,000 600,000 400,000 (609,000) (435,000) (120,000) $231,000 $165,000 $280,000 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? $6 $3 Req C2 to E Determine the margin of safety as a percentage for each product. Note: Round your answers to whole percentage values. Bath Oil 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? < Req A b Ans.... Color Gel 80,000 $13 $8 Color Gel % Bes... Req B > ezto.mheducation.com Saved < Prev US.... fron.... 3 of 5 Next > win.
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