Ages Cosmetics makes an anti-aging line of cosmetic products. It has been developing a new face cream (called the Fountain of Youth) with a breakthrough product called T50, which has shown remarkable improvements in reducing the signs of aging in a large test group.

The company has spent $4,500,000 at this point on testing and developing the Fountain of Youth.

The company is expecting to sell 360,000 jars per year for five years. The product is expected to incur the following costs on a monthly basis for production:

a. What is the life-cycle cost for the Fountain of Youth?

b. What price would you recommend the company charge for this new cream if it wants to achieve a 50% mark-up on life-cycle costs?

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Direct materials Direct labour Variable overhead Fixed overhead Selling and admin. $4.25 per jar $1.00 per jar $0.50 per jar $45,000 per month $1.25 per jar