Reference no: EM131750395

 

3. Rundle 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 Gel
Budgeted sales in units (a)	126,000	206,000	86,000
Expected sales price (b)	$	8	$	6	$	13
Variable costs per unit (c)	$	2	$	4	$	9
Income statements
Sales revenue (a × b)	$	1,008,000	$	1,236,000	$	1,118,000
Variable costs (a × c)	(252,000	)	(824,000	)	(774,000	)
Contribution margin	756,000	412,000	344,000
Fixed costs	(576,000	)	(320,000	)	(108,000	)
Net income	$	180,000	$	92,000	$	236,000

Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.)

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.)