Question & Answer: Parisian Cosmetics Company is planning a one-month campaign for September to pro- mote sales of one of its two cosmetics produ…..

Parisian Cosmetics Company is planning a one-month campaign for September to pro- mote 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 fol- lowing data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Moisturizer Perfume $55 Unit selling price Unit production costs: $14 Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit production costs $28 15 $21 Unit variable selling expenses Unit fixed selling expenses 12 $49 Total unit costs Operating income per unit $11 No increase in facilities would be necessary to produce and sell the increased out put. It is anticipated that 22,000 additional units of moisturizer or 20,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product. Instructions 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 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). State briefly your reasons for supporting or opposing the tentative decision

Question & Answer: Parisian Cosmetics Company is planning a one-month campaign for September to pro- mote sales of one of its two cosmetics produ..... 1

Parisian Cosmetics Company is planning a one-month campaign for September to pro- mote 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 fol- lowing data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Moisturizer Perfume $55 Unit selling price Unit production costs: $14 Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit production costs $28 15 $21 Unit variable selling expenses Unit fixed selling expenses 12 $49 Total unit costs Operating income per unit $11 No increase in facilities would be necessary to produce and sell the increased out put. It is anticipated that 22,000 additional units of moisturizer or 20,000 additional units of perfume could be sold from the campaign without changing the unit selling price of either product. Instructions 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 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). State briefly your reasons for supporting or opposing the tentative decision

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Question & Answer: Parisian Cosmetics Company is planning a one-month campaign for September to pro- mote sales of one of its two cosmetics produ..... 2

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