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Fanning 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 (ax c) Contribution margin Fixed costs Net income Margin of safety Skin Crean 110,000 Req B 8 % $ $ 880,000 (220,000) 660,000 (432,000) $ 228,000 2 Relevant Information Bath Oil 190,000 % $ $ Reg D to E

Fanning 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 (ax c) Contribution margin Fixed costs Net income Margin of safety Skin Crean 110,000 Req B 8 % $ $ 880,000 (220,000) 660,000 (432,000) $ 228,000 2 Relevant Information Bath Oil 190,000 % $ $ Reg D to E

FINANCIAL ACCOUNTING
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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Fanning 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 (ax b). Variable costs (ax c) Contribution margin. Fixed costs Net income Skin Cream 110,000 Margin of safety 8 Req B $ $ 880,000 (220,000) 660,000 (432,000) $ 228,000 2 % Relevant Information Bath Oil 190,000 % $ $ Reg D to E <Reg A 4 2 $ 760,000 (380,000) 380,000 (240,000) 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. $ 140,000 c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Complete this question by entering your answers in the tabs below. Color Gel 70,000 Req A Reg C Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.) Skin Cream Bath Oil Color Gel $ s % $ 770,000 (490,000) 280,000 (76,000) $ 204,000 11 7 Req B >
Transcribed Image Text:Fanning 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 (ax b). Variable costs (ax c) Contribution margin. Fixed costs Net income Skin Cream 110,000 Margin of safety 8 Req B $ $ 880,000 (220,000) 660,000 (432,000) $ 228,000 2 % Relevant Information Bath Oil 190,000 % $ $ Reg D to E <Reg A 4 2 $ 760,000 (380,000) 380,000 (240,000) 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. $ 140,000 c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Complete this question by entering your answers in the tabs below. Color Gel 70,000 Req A Reg C Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.) Skin Cream Bath Oil Color Gel $ s % $ 770,000 (490,000) 280,000 (76,000) $ 204,000 11 7 Req B >
■ Book P Print C ferences 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Reg A Sales revenue Variable costs Complete this question by entering your answers in the tabs below. Contribution margin Fixed cost Net income Show Transcribed Text Req A Required Rea B Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. FANNING COMPANY Income Statements Skin Cream Req B Percentage change in net income Show Transcribed Text Req A Req C 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Complete this question by entering your answers in the tabs below. Reg B Reg D to E Reg D to E For each product, determine the percentage change in net income that results from the 20 percent increase in sales. (Round) your answers to whole percentage values.) Skin Cream Bath Oil Req C Show Transcribed Text 3 Reg A % Reg C Color Gel c < Req B Bath Oil Req D to E Reg C > C % Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line? < Req C 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Complete this question by entering your answers in the tabs below. Color Gel % Req D to E > C Reg D to E>
Transcribed Image Text:■ Book P Print C ferences 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Reg A Sales revenue Variable costs Complete this question by entering your answers in the tabs below. Contribution margin Fixed cost Net income Show Transcribed Text Req A Required Rea B Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. FANNING COMPANY Income Statements Skin Cream Req B Percentage change in net income Show Transcribed Text Req A Req C 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Complete this question by entering your answers in the tabs below. Reg B Reg D to E Reg D to E For each product, determine the percentage change in net income that results from the 20 percent increase in sales. (Round) your answers to whole percentage values.) Skin Cream Bath Oil Req C Show Transcribed Text 3 Reg A % Reg C Color Gel c < Req B Bath Oil Req D to E Reg C > C % Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line? < Req C 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. c. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. 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? Complete this question by entering your answers in the tabs below. Color Gel % Req D to E > C Reg D to E>
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