Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Connect For Financial Accounting Fundamentals

Authors: Author

8th Edition

126411169X, 9781264111695

More Books

Students also viewed these Accounting questions

Question

What factors reduce the effectiveness of companies budgeting? LO1

Answered: 1 week ago