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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
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A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Please Complete all requirement And Do not give solution in images format
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 >
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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