Essence of Esther Cosmetics Company is planning a one- month campaign for September to promote sales of
Question:
No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 24,000 additional units of moisturizer or 20,000 additional units of perfume could be sold without changing the unit selling price of either product.
Instructions
1. Prepare a differential analysis as of August 21, 2014, to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2).
2. The sales manager had tentatively decided to promote perfume, estimating that operating income would be increased by $ 30,000 ($ 9 operating income per unit for 20,000 units, less promotion expenses of $ 150,000). The manager also believed that the selection of moisturizer would reduce operating income by $ 30,000 ($ 5 operating income per unit for 24,000 units, less promotion expenses of $ 150,000). State briefly your reasons for supporting or opposing the tentativedecision.
Step by Step Answer:
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac