Differential Analysis for Sales Promotion Proposal Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $150,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:   Moisturizer Perfume Unit selling price   $35     $55   Unit production costs:           Direct materials $(12)   $(20)     Direct labor (8)   (10)     Variable factory overhead (3)   (6)     Fixed factory overhead (2)   (6)     Total unit production costs $(25)   $(42)   Unit variable selling expenses (2)   (3)   Unit fixed selling expenses (2)   (8)     Total unit costs $(29)   $(53)   Operating income per unit $ 6   $ 2   No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 40,000 additional units of moisturizer or 30,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product. Required:  Prepare a differential analysis as of November 2 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter "0". Differential Analysis Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2) November 2   Promote Moisturizer (Alternative 1) Promote Perfume (Alternative 2) Differential Effects (Alternative 2) Revenues $ $ $ Costs:       Direct materials       Direct labor       Variable factory overhead       Variable selling expenses       Sales promotion       Profit (loss) $ $ $

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3PA: Differential analysis for sales promotion proposal Kankakee Cosmetics Company is planning a...
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Differential Analysis for Sales Promotion Proposal

Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $150,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign:

 

Moisturizer

Perfume

Unit selling price

 

$35

   

$55

 

Unit production costs:

       
 

Direct materials

$(12)

 

$(20)

 
 

Direct labor

(8)

 

(10)

 
 

Variable factory overhead

(3)

 

(6)

 
 

Fixed factory overhead

(2)

 

(6)

 
 

Total unit production costs

$(25)

 

$(42)

 

Unit variable selling expenses

(2)

 

(3)

 

Unit fixed selling expenses

(2)

 

(8)

 
 

Total unit costs

$(29)

 

$(53)

 

Operating income per unit

$ 6

 

$ 2

 

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 40,000 additional units of moisturizer or 30,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product.

Required:

  1.  Prepare a differential analysis as of November 2 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter "0".

Differential Analysis

Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2)

November 2

 

Promote
Moisturizer
(Alternative 1)

Promote
Perfume
(Alternative 2)

Differential
Effects
(Alternative 2)

Revenues

$

$

$

Costs:

     

Direct materials

     

Direct labor

     

Variable factory overhead

     

Variable selling expenses

     

Sales promotion

     

Profit (loss)

$

$

$

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