Munoz Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a…

Munoz 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.

 Relevant Information Skin Cream Bath Oil Color GelBudgeted sales in units (a) 122,000   202,000   82,000 Expected sales price (b)$11  $8  $14 Variable costs per unit (c)$2  $3  $8 Income statements           Sales revenue (a × b)$1,342,000  $1,616,000  $1,148,000 Variable costs (a × c) (244,000)  (606,000)  (656,000)Contribution margin 1,098,000   1,010,000   492,000 Fixed costs (720,000)  (750,000)  (150,000)Net income$378,000  $260,000  $342,000   

Required:

  1. Determine the margin of safety as a percentage for each product.
  2. Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume.
  3. For each product, determine the percentage change in net income that results from the 20 percent increase in sales.
  4. Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line?
  5. Assuming that management is optimistic and risk aggressive, which product should the company add to it

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more