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Company B is about to being developing a new product for launch in its existing market. They have forecast sales of 20,000 units and the marketing department suggest a selling price of $43/unit.The company seeks to make a mark-up of 40% product cost. It is estimated that the lifetime costs of the product will be as follows:
1 Design & development costs $4300
2 Manufacturing costs $15/unit
3 Plant decommissioning costs $30000The company estimates that if it were to spend an additional $15000 on design, manufacturing costs/unit could be reduced.
What is the life cycle cost?
A $24.87
B $22
C $22.87
D $24Answer: A
original life cycle per unit is = ($43000 + (20000x$15)+$30000)/15000 = $24.87
Can you please indicate what the implication of dividing with $15000 is? I was dividing by 20000 units.
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