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Requirement 3: Multi-product CVP To diversify your division's product mix, you are considering expanding your product line in the coming year by introducing a second
Requirement 3: Multi-product CVP To diversify your division's product mix, you are considering expanding your product line in the coming year by introducing a second product, hydraulic fluid. Projected revenue and cost data for hydraulic fluid are as follows: Selling price per gallon $90.00 Variable costs per gallon Direct materials $18.50 Direct labor $ 7.50 Manufacturing overhead $ 6.00 Selling expenses $ 4.00 If you decide to introduce hydraulic fluid in FYX2, then no additional manufacturing facilities or capacity would be required. Fixed advertising costs, however, would need to increase by $300,000 to promote both turbine oil and hydraulic fluid. Your company's marketing department estimates one gallon of hydraulic fluid would be sold for every four quarts of turbine oil during the new product's introductory phase, which is expected to span the next 18 months. a. If your division introduces hydraulic fluid, maintains the current selling price of $40 per quart for turbine oil, and experiences the cost changes described in Requirement 2, then how many units of each product would be required for your division to break even in the coming year? Break-even sales (in quarts) of turbine oil: (2 points) Break-even sales (in gallons) of hydraulic fluid: (2 points) Total break-even sales in units): (1 point) Requirement 3: Multi-product CVP To diversify your division's product mix, you are considering expanding your product line in the coming year by introducing a second product, hydraulic fluid. Projected revenue and cost data for hydraulic fluid are as follows: Selling price per gallon $90.00 Variable costs per gallon Direct materials $18.50 Direct labor $ 7.50 Manufacturing overhead $ 6.00 Selling expenses $ 4.00 If you decide to introduce hydraulic fluid in FYX2, then no additional manufacturing facilities or capacity would be required. Fixed advertising costs, however, would need to increase by $300,000 to promote both turbine oil and hydraulic fluid. Your company's marketing department estimates one gallon of hydraulic fluid would be sold for every four quarts of turbine oil during the new product's introductory phase, which is expected to span the next 18 months. a. If your division introduces hydraulic fluid, maintains the current selling price of $40 per quart for turbine oil, and experiences the cost changes described in Requirement 2, then how many units of each product would be required for your division to break even in the coming year? Break-even sales (in quarts) of turbine oil: (2 points) Break-even sales (in gallons) of hydraulic fluid: (2 points) Total break-even sales in units): (1 point)
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