Guti company is planning a new product and market research has revealed that the product should sell 10,000 units at $21 per unit. The company seeks to make a mark-up of 40% product cost. It is estimated that the life time costs of the product will be as follows: Design and development costs $50,000. Manufacturing cost $10 per unit. End of life costs $20,000. The company estimates that if it were to spend an additional $15,000 on design in a bid to promote environmentally friendly manufacturing processes, the manufacturing costs per unit would be reduced.

Required Calculate the target cost of the product. [8 marks] What is the original life cycle cost per unit, and is the product worth making on that basis?[12 marks] 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 the required mark up ? [5marks]