P15.28 Life cycle budgeting knowledge consolidation, budgeted financial statements and NPV analysis, and life cycle management, continuous improvement (value engineering) or redesign (re-engineering) AusRing Ltd has developed a new fitness tracker bluetooth smartwatch for Android or iOS to be called the Intouch NHealthy LINH. To compete effectively with models offered by other companies, the INH would need to be priced at $385. A 30 per cent profit margin is needed each year the product is offered to the market due to the product's short life cycle. For the long-term view of the project, a 9% cost of capital (required rate of return] is required to be considered in an NPV analysis for the proposed development of the new product. The technology in built-in phone wristwatches is developing rapidly, and therefore the INH is expected to be obsolete within three years of entering the market. Initial estimates of the INH's cost of manufacture per unit are as follows: Direct material Direct labour Manufacturing overhead* $104 55 33 $192 "Manufacturing overhead is allocated at 60% of direct labour cost. The marketing department is keen to introduce the INH as soon as possible. However, the management accountant is concerned about the non-manufacturing costs likely to be associated with the new product. He asks the departments that are upstream and downstream of manufacturing to estimate the costs in their departments associated with the development, production and sale of the INH. He receives the following information: Estimated Costs Associated with the Proposed INH (5'000) Department 2018 2019 2020 2021 2022 Research and 1000 development Product and process 500 540 design Marketing 500 450 500 400 Customer support 350 550 950 350 Total 2.000 1.350 1050 1.350 350 Copyright 2010 Cengage Lwing All Rights Reserved. May not be