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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
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