A company is planning a new product. Market research information suggests that the new product will sell 10,000 total units at a price of $21.00 per unit. The company estimates the lifetime costs of the product as follows: Estimated costs Design and development costs: $50,000 Manufacturing costs: End-of-life costs: $10.00 per unit $20,000 The company estimates that if it were to spend an additional $15,000 on design, then manufacturing costs could be reduced. a) What is the target cost of the product if the company seeks a markup of 40% of product Round answer to two decimal places. $ Given the target cost, would you expect the company to launch the product? Yes = b) What is the maximum allowable product manufacturing cost per unit if the company seeks a markup of 40% of the original life-cycle cost? Round answer to two decimal places. $ Using the total life-cycle cost to determine target product cost, would you expect the company to launch the product? No = c) Assume the additional $15,000 was spent on design. By how much would the design changes need to reduce the per unit product cost to meet the goal of a 40% markup on total life-cycle costs? Round answer to two decimal places. $
A company is planning a new product. Market research information suggests that the new product will sell 10,000 total units at a price of $21.00 per unit. The company estimates the lifetime costs of the product as follows: Estimated costs Design and development costs: $50,000 Manufacturing costs: End-of-life costs: $10.00 per unit $20,000 The company estimates that if it were to spend an additional $15,000 on design, then manufacturing costs could be reduced. a) What is the target cost of the product if the company seeks a markup of 40% of product Round answer to two decimal places. $ Given the target cost, would you expect the company to launch the product? Yes = b) What is the maximum allowable product manufacturing cost per unit if the company seeks a markup of 40% of the original life-cycle cost? Round answer to two decimal places. $ Using the total life-cycle cost to determine target product cost, would you expect the company to launch the product? No = c) Assume the additional $15,000 was spent on design. By how much would the design changes need to reduce the per unit product cost to meet the goal of a 40% markup on total life-cycle costs? Round answer to two decimal places. $
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...
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