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life cycle costing

Ddaberechi14y ago
i don't no how they got the production and customer service figure,here is the question.solaris specialises in manufacture of solar penal.it is planning to introduce a new slimline solar panel specially designed for small houses.development of a new panel is to begin shortly and solaris is in the process of determining the price of the panel.it expects the new product to have the following cost. year 1 year2 year3 year4
units manufacture and sold 20000 150000 200000 5000
$ $ $ $
R&D cost 1900,000 100000 - -
marketing costs 100000 75000 50000 10000
production cost per unit 500 450 400 450
customer service cost per unit 50 40 40 40
disposal of specialist equipment 300000
the marketing director believes that customers will be prepared to pay $500 for a solar panel but the financial director believes this will not cover all the costs throughout the life cycle.
REQUIRED
calculate the costs per unit looking at the whole life cycle and comment on the suggested price
John MoffatJohn MoffatTutor14y ago#1
It is difficult for me to answer this because although you say that you don't know how they got the production and customer service figure, I don't know who 'they' are, or what figures they got!

However, from what you have typed it seems that the production cost in the first year is 20000 units x $500 per unit; in the second year 150000 units x $450 per unit; and so on. So the total cost over the lifecycle is simply adding all four years costs together.

The same sort of arithmetic would apply to the customer service cost. That is 20,000 x $50 in the first year etc, and then add them all together for the total cost over the lifecycle.
John MoffatJohn MoffatTutor14y ago#2
It is difficult for me to answer this because although you say that you don't know how they got the production and customer service figure, I don't know who 'they' are, or what figures they got!

However, from what you have typed it seems that the production cost in the first year is 20000 units x $500 per unit; in the second year 150000 units x $450 per unit; and so on. So the total cost over the lifecycle is simply adding all four years costs together.

The same sort of arithmetic would apply to the customer service cost. That is 20,000 x $50 in the first year etc, and then add them all together for the total cost over the lifecycle.
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