Problem 2: L\'Essence Cosmetics Company is planning a one-month campaign for Jun

Question

Problem 2:

L'Essence Cosmetics Company is planning a one-month campaign for June to promote sales of one of its two cosmetics products. A total of $80,000 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:

No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 19,000 additional units of moisturizer or 16,000 additional units of perfume could be sold without changing the unit selling price of either product.

1. Prepare a differential analysis as of June 15, 2014, to determine whether to promote moisturizer (Alternative 1) or perfume (Alternative 2). If an amount is zero, enter zero "0".

Problem 3:

The capital investment committee of Cross Continent Trucking Inc. is considering two capital investments. The estimated income from operations and net cash flows from each investment are as follows:

Each project requires an investment of $440,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 12% for purposes of the net present value analysis.

1a. Compute the average rate of return for each investment. If required, round your answer to one decimal place.

Warehouse __________ %

Tracking Technology __________ %

1b. Compute the net present value for each investment. Use the present value of $1 table above. If required, use the minus sign to indicate a negative net present value.

Moisturizer Perfume Unit selling price $47 $52 Unit production costs: $ 8 $11 Direct materials Direct labor Variable factory overhead Fixed factory overhead Total unit production costs 4 $18 15 8 $41 $ 6 $23 14 6 $43 $ 9 Unit variable selling expenses Unit fixed selling expenses Total unit costs Operating income per unit

Explanation / Answer

1 2 diff Revenue 893000 832000 61000 cost: DM 152000 176000 -24000 DL 57000 64000 -7000 Variable Ohs 38000 48000 -10000 Varaible SP 285000 224000 61000 Sales promotion 80000 80000 0 Income/(Loss) 281000 240000 41000

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