Power systems inc. manufactures jet engines for the united states armed forces on a cost-plus basis. the production cost of a particular jet engine is shown below: * direct materials = $200,000* direct labor = 150,000* manufacturing overhead: * supervisor's salary = 20,000* fringe benefits on direct labor = 15,000* depreciation = 12,000* rent = 11,000* total cost = $408,000if production of this engine was discontinued, the production capacity would be idle, and the supervisor would be laid off. the depreciation referred to above is for special equipment that would have no resale value and that does not wear out through use. when asked to bid on the next contract for this engine, the minimum unit price that power systems should bid is: 1) $408,000.2) $365,000.3) $397,000.4) $385,000.

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?