Question $2$

Examine the details provided below and answer the following questions.

INFORMATION

Digital Health Matrix Inc. $($DHM$)$ specialises in the manufacturing of smartwatches designed to monitor users' heart rate, blood pressure, and blood oxygen levels, while also tracking overall fitness. Currently, the firm is in the developmental phase of a groundbreaking smartwatch model. This new device is poised to offer enhanced features and functionalities, alongside sleeker, lighter, and more user$-$friendly designs. With an anticipated product life cycle of two years, DHM has conducted extensive market research to establish a target selling price and project lifetime sales volumes for the product. Additionally, cost estimates have been meticulously prepared, aligning with the proposed product specifications.

Employing life cycle costing methodology, DHM determines target costs for its products by averaging costs across the entire product lifecycle, ensuring accuracy and consistency. The management accountant at DHM strongly believes that the successful implementation of cost reduction strategies will not only bolster the company's competitiveness but also enhance its profitability in the smartwatch market. This strategic approach will enable the firm to offer high$-$quality products at attractive price points while maintaining satisfactory profit margins.

You are provided with the following relevant information for the smartwatch:

$\backslash$table$[[$Projected lifetime sales volume,$100000$ units$],[$Target selling price per unit,R$7500],[$Target profit margin $(40\%$ selling price$),$R$3000],[$Target cost per unit,R$4500],[$Estimated lifetime cost per unit $($see note below for detailed breakdown$),$R$5400]]$

Note: Estimated lifetime cost per unit:

$\backslash$table$[[$Manufacturing costs:,$R,R$