Praeuner Company has surveyed the market and set a target selling price of $2,000 per unit for its product. Praeuner believes it can sell 100,000 units of this product over its two-year life. Praeuner requires a 20 percent return on selling price. Therefore, its target cost per unit is $1,600. Praeuner has gathered the following budgeted cost data: Unit cost $ 1,200 Batch cost (batch size = 1,000) 15,000 Product-sustaining cost (annual) 480,000 Facility-sustaining cost (annual) 900,000 In addition to the previous costs, Praeuner will incur $5,000,000 in research and development costs before the product is manufactured.

Required:

A. What is the total target cost for this product’s life?
B. What is the total budgeted cost for this product over its two-year life?
C. Should Praeuner develop this product? Why?