Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product.     Askin   Bskin   Total Sales $ 4,011,000     $ 2,605,500     $ 6,616,500   Cost of goods sold   (2,605,500 )     (2,111,000 )     (4,716,500 ) Gross profit $ 1,405,500     $ 494,500     $ 1,900,000   Research and development                   (1,181,000 ) Selling expenses                   (135,500 ) Profit before taxes                 $ 583,500       Seventy-five percent of the research and development and selling expenses were traceable to Askin. Profit before taxes for the Bskin product, per life-cycle income statements, is:

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Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product.

 

  Askin   Bskin   Total
Sales $ 4,011,000     $ 2,605,500     $ 6,616,500  
Cost of goods sold   (2,605,500 )     (2,111,000 )     (4,716,500 )
Gross profit $ 1,405,500     $ 494,500     $ 1,900,000  
Research and development                   (1,181,000 )
Selling expenses                   (135,500 )
Profit before taxes                 $ 583,500  
 

 

Seventy-five percent of the research and development and selling expenses were traceable to Askin.

Profit before taxes for the Bskin product, per life-cycle income statements, is:

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