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Hello sir,
can you please explain question number 23 on Kaplan Exam kit. I don’t understand how to get the answer!
Thanks in advance!
I am sorry, but I do not have a Kaplan Exam Kit (I don’t work for Kaplan 🙂 ).
If it is an MCQ question, then maybe you can type it. Otherwise if it is labelled as a past exam question, then if you give me the name and the date of the exam then I will be able to find it.
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 products will be as follows:
1. Design and development costs $43000
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. $24The answer is supposed to be A.
I have managed to find this question elsewhere, and it is one of many mistakes in the Kaplan Exam Kit.
The correct answer is $18.65.
(If you use your code at the front of the Exam Kit and go to their website, then you will find an errata sheet with all the corrections of errors listed.)
Hi Mr John,
Could please explain the answer($18.65) how you got it,by knowing the mark up 40% and the price of $ 43/unit then we already have the life cost per unit of 30.714,
Thanks,
$30.714 is not the lifecycle cost – it is the target cost (which is not asked for).
To get the lifecycle cost you add up all the costs over the life of the product, and divide by the total number of units to be produced.
(The free lecture on life-cycle costing will help you – I work through a very similar example in the lecture)
Ok,
I added the (15000 +43000+30000=88000)
and then for the manufacturing cost (originally it is 15 x 20000=300000) -the 15000 the addition to the design cost ,so
300000-15000=285000/20000=14.25/unit
adding 285000 to the life cost total (285000+88000=373000/20000)
we get $ 18.65 life cost per unit
am I right ,
Thanks,
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