### Differential Analysis#### Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2)#### Date: August 21| | Promote Moisturizer (Alternative 1) | Promote Perfume (Alternative 2) | Differential Effect on Income (Alternative 2) ||----------------------------------|--------------------------------------|----------------------------------|-----------------------------------------------|| **Revenues** | | | || **Costs:** | | | || Direct materials | | | || Direct labor | | | || Variable factory overhead | | | || Variable operating expenses | | | || Sales promotion | | | || **Income (loss)** | | | |Parisian should promote the _______________.#### Key Essay Answer[Key essay answer here] **Differential Analysis for Sales Promotion Proposal***Objective: Determine which product, moisturizer or perfume, to promote in the September sales campaign for Parisian Cosmetics Company.*Parisian Cosmetics Company is planning a one-month campaign for September to promote sales of one of its two cosmetics products. A total of $140,000 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 | $55 | $60 || **Unit production costs:** | | || Direct materials | $9 | $14 || Direct labor | $3 | $5 || Variable factory overhead | $3 | $5 || Fixed factory overhead | $6 | $4 || **Total unit production costs** | $21 | $28 || Unit variable selling expenses | $16 | $15 || Unit fixed selling expenses | $12 | $6 || **Total unit costs** | $49 | $49 || **Operating income per unit** | $6 | $11 |**Analysis:**1. **Output and Facilities:** No increases in facilities would be necessary to produce and sell the increased output.2. **Sales Estimates:** - 22,000 additional units of moisturizer - 20,000 additional units of perfume Both can be sold from the campaign without changing the unit selling price of either product.**Instructions:**1. **Differential Analysis:** Prepare a differential analysis as of August 21 to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2).2. **Decision Evaluation:** The sales manager had tentatively decided to promote perfume, estimating that operating income would be increased by $80,000 ($11 operating income per unit for 20,000 units less promotion expenses of $140,000). The manager also believed that the selection of moisturizer would reduce operating income by $8,000 ($6 operating income per unit for 22,000 units less promotion expenses of $140,000).

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1. Prepare a differential analysis as of August 21 to determine whether to promote mois- turizer (Alternative 1) or perfume (Alternative 2). 2. The sales manager had tentatively decided to promote perfume, estimating lyo that operating income would be increased by $80,000 ($11 operating income per for 20,000 units less promotion expenses of $140,000). The manager also believed that the selection of moisturizer would reduce operating income by $8,000 ($6 operating income per unit for 22,000 units less promotion expenses of $140,000). State briefly your reasons for supporting or opposing the tentative decision. unit

1. Prepare a differential analysis as of August 21 to determine whether to promote mois- turizer (Alternative 1) or perfume (Alternative 2). 2. The sales manager had tentatively decided to promote perfume, estimating lyo that operating income would be increased by $80,000 ($11 operating income per for 20,000 units less promotion expenses of $140,000). The manager also believed that the selection of moisturizer would reduce operating income by $8,000 ($6 operating income per unit for 22,000 units less promotion expenses of $140,000). State briefly your reasons for supporting or opposing the tentative decision. unit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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