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PR 25-3A Differential analysis for sales promotion proposal Obj. 1 Excel Parisian Cosmetics Company is planning a one-month campaign for September to promote 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 following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign: Show Mo How Moisturizer Perfume $55 $60 $14 $ 9 3 Unit seiling price Unit production costs Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit production costs Unit variable selling expenses Unit foxed selling expenses 3 6 $21 16 12 5 5 4 $28 15 6 Moisturizer Perfume $55 $60 Unit selling price Unit production costs: Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit production costs Unit variable selling expenses Unit fixed selling expenses Total unit costs Operating income per unit $ 9 3 3 6 $21 16 12 $49 $ 6 $14 5 5 4 $28 15 6 $49 $11 No increase in facilities would be necessary to produce and sell the increased output. 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. 1. Differential Analysis Promote Moisturizer (Alt. 1) or Promote Perfume (Alt. 2) August 21 Promote Promote Moisturizer Perfume (Alternative 1) (Alternative 2) Differential Effect on Income (Alternative 2) $ 1,210,000 2. 3 4 5 26 27 28 29 BO 31 Revenues Costs: Direct materials Direct labor Variable factory overhead Variable operating expenses Sales promotion Income (loss) Parisian should promote the