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Decision on whether to launch a new product A company is currently manufacturing at only 60% of full practical capacity, in each of its two production departments, due to a reduction in market share. The company is secking to launch a nevw product which it is hoped will recover some lost sales. The estimated direct costs of the new product, Product X, are to be established from the following information: Direct materials: Every 100 units of the product will require 30 kilos net of Material A. Losses of 10% of materials input are to be expected. Material A costs 5.40 per kilo before discount. A quantity discount of 5% is given on all purchases if the monthly purchase quantity exceeds 25,000 kilos, Other materials are expected to cost 1.34 per unit of Product X Direct labour (per hundred units): Department 1:40 hours at 12.00 per hour. Department 2: 15 hours at 13.00 per hour. Separate overhead absorption rates are established for each production department. Department I overheads are absorbed at 130% of direct wages, which is based upon the expected overhead costs and usage of capacity if Product X is launched. The rate in Department 2 is to be established as a rate per direct labour hour also based on expected usage of capacity. The following annual figures for Department 2 are based on full practical capacity Overhead: 5.424.000 Direct labour hours: 2,200,000 Variable overheads in Department l are assessed at 40% of direct wages and in Department 2 are 1,980,000 (at full practical capacity). Non-production overheads are estimated as follows (per unit of Product X): Variable: 0.70 Fixed: 1.95 The selling price for Product X is expected to be 16 per unit, with annual sales of 2.400,000 units. Required: (a) Determine the estimated cost per unit of Product X. (b) Comment on the viability of Product X. (c) Market research indicates that an alternative selling price for Product X could be 15.50 per unit, at which price annual sales would be expected to be 2,900,000 units. Determine, and comment briefly upon, the optimum selling (13 marks) (7 marks) marks) Total 25 marks)