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Kittson Bookshop has developed a new e-book to compete with the competition. The product is estimated to have a lifecycle of five years and the

Kittson Bookshop has developed a new e-book to compete with the competition. The product is estimated to have a lifecycle of five years and the following costs relate to the product over its entire life cycle:

Costs in millions

Year 1

Year 2

Year 3

Year 4

Year 5

R & D costs

800

Design costs

300

Production costs

400

200

100

Production volume

140

60

40

The production volumes above were noted in thousands and management expects to sell each book for $14,000.

Required:

a) Calculate the cost and profit per unit using life-cycle costing. (3 marks)

b) Briefly explain the five stages of the product life cycle. (5 marks)

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