a) what will a lifetime cost analysis of Skinny-Bar and propose a selling price for this new product based on BBCC's markup policy. The overhead costs, the batch size, the machine hours per batch, the number of inspections per batch, set up times and the number of product lines should be based on the activity-based analysis prepared in requirement 1 using the batch size for the The-Bar product. Direct labour hours per batch is 22.5. Product costs are based on one product line. Lifetime research and development costs are $900,000 for the Skinny-Bar. Use the activity rates calculated in requirement 1 as well. Compare the proposed price with the selling price set at the time of the initial introduction of this product. Discuss the adequacy of this new proposed price.

Exhibit 1

Planning notes from the 20X5 launch of the Skinny-Bar 20X5

actual sales $288,600

Total manufacturing costs 230,880

(Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.)

The contribution margin ratio for this product was 35%.

156,000 bars were sold at $1.85 per bar.

This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed.

The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively.