Kankakee Cosmetics Company is planning a one-month campaign for December to prom
ID: 2556680 • Letter: K
Question
Kankakee Cosmetics Company is planning a one-month campaign for December to promote sales of one of its two cosmetics products. A total of $139,897 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:
1
Moisturizer
Perfume
2
Unit selling price
$55.39
$59.46
3
Unit production costs:
4
Direct materials
$9.08
$13.93
5
Direct labor
3.03
4.93
6
Variable factory overhead
3.07
4.90
7
Fixed factory overhead
6.09
4.00
8
Total unit production costs
$21.27
$27.76
9
Unit variable selling expenses
16.10
14.90
10
Unit fixed selling expenses
12.07
5.90
11
Total unit costs
$49.44
$48.56
12
Operating income per unit
$5.95
$10.90
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
Moisturizer
Perfume
2
Unit selling price
$55.39
$59.46
3
Unit production costs:
4
Direct materials
$9.08
$13.93
5
Direct labor
3.03
4.93
6
Variable factory overhead
3.07
4.90
7
Fixed factory overhead
6.09
4.00
8
Total unit production costs
$21.27
$27.76
9
Unit variable selling expenses
16.10
14.90
10
Unit fixed selling expenses
12.07
5.90
11
Total unit costs
$49.44
$48.56
12
Operating income per unit
$5.95
$10.90
Explanation / Answer
Alternative 1 Alternative 2 Alternative 2 Revenues 1218580 1189200 29380 Costs Direct Materials 199760 278600 78840 Direct labor 66660 98600 31940 Variable factory overhead 67540 98000 30460 Variable selling expenses 354200 298000 -56200 Sales promotion 139,987 139,987 0 Income (loss) 390,433 276,013 -114,420
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