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Moma Ltd. is a manufacturer of electronic sport gadgets and is about to launch their new product line called the Watchfit. As this is a
Moma Ltd. is a manufacturer of electronic sport gadgets and is about to launch their new product line called the Watchfit. As this is a premium product, the Watchflt it is to be priced at SYSD, with a desired prot margin on sales of at least 30%. Given the hitech nature of this product, it is expected to be obsolete within three vears from launch. Initial estimates of the Watcht's manufacturing costs per unit are as follows: Direct materials 5250 Direct labour 5125 Fixed and variable manufacturing overhead 5% TotolI 5500 Other costs estimated for the Watcht product line over the ooming years are provided in the table below. Year 1 | Research and Development $1,500,000 ProductfProcess design $3,000,000 Marketing 51.noo,ooo saoopoo ssoo,ooo swoops _ Customersupport _ $250,000 $300,000 $200,000 Tomi $5,500,000 $1,350,000 $1,300,000 $1,150,000 $200,000 Mama Ltd. has also forecasted the following Watchfit sales unit figures: Year 2 10,000 units {launch year} Year 3 15,000 units Year 4 5,000 units Assume that all Watchfit's produced is sold in the same year he no inventories}. Required: {12 marks]: [a] Calculate the target cost for the Watchfit that will allow Moma Ltd. to meet its target selling price of $?50 and target prot margin of 30% on sales. [1 mark]
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