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A company is planning a new product. Market research information suggests that the product should sell 10,000 units at RM21.00/unit. The company seeks to make
A company is planning a new product. Market research information suggests that the product should sell 10,000 units at RM21.00/unit. The company seeks to make a mark-up of 40% product cost. It is estimated that the lifetime costs of the product will be as follows: 1 Design and development costs RM50,000 2 Manufacturing costs RM10/unit 3 End of life costs RM20,000 The company estimates that if it were to spend an additional RM15,000 on design, manufacturing costs/ unit could be reduced. Required: (a) What is the target cost of the product? (b) What is the original lifecycle cost per unit and is the product worth making on that basis? (c) If the additional amount were spent on design, what is the maximum manufacturing cost per unit that could be tolerated if the company is to earn its required mark-up
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