The chart shows the costs associated with the purchase of a new home. in the chart, closing costs refers to the cost of making repairs to the new home. fees that must be paid to local schools. costs associated with obtaining the loan. fees assessed by the state or local government

Fanning 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. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 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?