Problem 11-29 Margin of safety and operating leverage LO 11-6 Baird 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 b ath Oil Color Gel 104,000 184,000 64,000 Budgeted sales in unita (a) Expected sales price (b) Variable costs per unit (c) Income statements Sales revenue (a*b) Variable costs (a xe) Contribution margin Pixed costs Set income $ 936,000 (208,000) 728.000 (441,000) $ 287.000 $ 736,000 (184,000) 552,000 (315,000) $ 237,000 $ 704,000 (384,000) 320,000 (80,000) $240.000 Required: a. Determine the margin of safety as a percentage for each product. b. Prepare revised Income statements for each product, assuming a 20 percent increase in the budgeted sales volume. C. For each product, determine the percentage change in net income that results from the 20 percent increase in sales. d. Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? e. Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line? Req A Req B ReqC Reg D to E Determine the margin of safety as a percentage for each product. (Round your answers to whole percentage values.) Skin Cream Bath Oil Margin of safety % % Color Gel % 1% Ree ReqB > Complete this question by entering your answers in the laus veiuw. Req A Rega Req B pea o ReqC Regic Reg D to e Reg D to E Prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. BAIRD COMPANY Income Statements Skin Cream Bath Oil Color Gel Sales revenue Variable costs Contribution margin Foxed cost Net income Prey 1 of 1 !!! Next Req A Reg B Reqc Reg D to E For each product, determine the percentage change in net income that results from the 20 percent increase in sales. (Rou your answers to whole percentage values.) Skin Cream Bath Oil Color Gel Percentage change in net income ( Req Reg D to E > Assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? Assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?