1. Barelane Ltd. is a yacht-building company that is considering the introduction of a new product line, the 'St Margaret' model, in 2018. The costs of product design and development are estimated at 3,800,000, which will be incurred during 2017. Each yacht will sell for 600,000 with demand of 20 yachts in 2018, 22 yachts in 2019 and 16 yachts in 2020. The price of a yacht will be increased in 2021 to 750,000 at which point demand will fall to 12 yachts in that year and the model will then be discontinued. All yachts are built only when the customer places the order. It is estimated that 2 yachts each year will require warranty repairs costing 20,000 per yacht but that these repairs will be done in the year following sale. To manufacture the yachts the company will buy a special machine called a 'yacht- saw' at the start of 2018 at a cost of 7 million. This machine can only make the 'St Margaret' model and will be depreciated on the basis of the number of units produced across its production life. In the year following the production of the last yacht Barelane Ltd. will dispose of the machine and clean up the site at a total cost of 825,000. The 'yacht-saw' will have no residual value. The variable costs of production for each yacht are estimated to be 350,000 in 2018 rising by 15% per year. Fixed costs associated with the production and marketing of the 'St Margaret' model will be 260,000 in 2018 rising by 8% each year. Neither of these costs includes an element for depreciation. REQUIRED: a) b) Produce a product lifecycle budget, split into annual intervals, for the 'St Margaret' model, rounding your answers to the nearest '000. (18 marks) How might Barelane Ltd. maximise the return on the 'St Margaret' model over the product life cycle? You should identify the principles for maximising return and suggest in practice how Barelane Ltd. might implement these principles. You should also identify any problems or conflicts between the solutions you suggest. (15 marks)