Jet Fuel (Continued) Olander has the opportunity to invest in a filtration system to increase the purity of the kerosene used in the jet fuel. This would enable a higher price from the buyers. Currently Olander is able to charge a 10% margin into the price using total cost + pricing (Assume your answer from Question 1 for crude oil cost of $75/barrel is the current price), but with this change he would be able to charge a 30% markup on the original total cost (Assume your answer from Question 1 is correct). This would take an investment of $8 million dollars for equipment lasting five years and an annual operating expense for the filters of $900,000. In addition, each litre of jet fuel needs a trace amount of stabilizer added that costs $0.50 per litre. Question 2. Perform an incremental analysis on switching to the filtration system assuming that the 10% margin price from Question 1 is the current status quo. Please examine the scenarios for barrels being $60 per barrel and $90 per barrel. Marginal & Mark Up Costs for Incremental Analysis New Cost Crude Oil Prices Product Category Initial total Desired Desired @ 10% New Cost @ cost / Litre Margin Markup Margin 30% markup $60 Gasoline $0.41 10% $0.45 30% $0.53 Jet Fuel $0.32 10% $0.35 30% $0.42 Asphalt $0.18 10% $0.20 30% $0.23 $75 Gasoline $0.45 10% $0.50 30% $0.59 Jet Fuel $0.35 10% $0.39 30% $0.46 Asphalt $0.20 10% $0.22 30% $0.26 $90 Gasoline $0.50 10% $0.55 30% $0.65 Jet Fuel $0.39 10% $0.43 30% $0.51 Asphalt $0.22 10% $0.24 30% $0.29