Ken Yalters, the COO of FreshSkin, Asked His Cost Management

question 41

Multiple Choice

Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product. $\begin{array}{lcccc} & \text { Askin } & \text { Bskin } & \text { Total } \\\text { Sales } & \$ 4,000,000 & \$ 2,600,000 & \$ 6,600,000 \\\text { Cost of goods sold } & (2.600 .000) & (2.100 .000) & (4.700 .000) \\\text { Gross profit } & \$ 1,400,000 & \$ 500,000 & \$ 1,900,000 \\\text { Research and development } & & & (1,170,000) \\\text { Selling expenses }&&&(130,000) \\\text { Profit before taxes }&&&\$600,000\end{array}$ Seventy-five percent of the research and development and selling expenses were traceable to Askin.
Profit before taxes for the Bskin product, per life-cycle income statements, is:

• A) $175,000.
• B) $425,000.
• C) $522,500.
• D) $207,500.
• E) $332,500.

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Definitions:

Psychosocial Crisis

A turning point or critical period in an individual's life where an adjustment is necessary due to a challenge in social, emotional, or psychological development.

Ego Integrity

A sense of wholeness and fulfilled life achievements, typically sought in later adulthood, representing the final stage of Erik Erikson's psychosocial development theory.

Despair

A state of utter hopelessness, where an individual feels a profound sense of loss or defeat.

Generativity

Erikson's stage of psychosocial development in which adults seek to create or nurture things that will outlast them, often by parenting or contributing to society.