Crystal's Performance Pizza is a small restaurant in Detroit that sells gluten-free pizzas. Crystal's very tiny kitchen has barely enough room for the four ovens in which her workers bake the pizzas. Crystal signed a lease obligating her to pay the rent for the four ovens for the next year. Because of this, and because Crystal's kitchen cannot fit more than four ovens, Crystal cannot change the number of ovens she uses in her production of pizzas in the short run. However, Crystal's decision regarding how many workers to use can vary from week to week because her workers tend to be students. Each Monday, Crystal lets them know how many workers she needs for each day of the week. In the short run, these workers are inputs, and the ovens are inputs.

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?