Question 3: (20 marks) The marketing department of Hercules Ltd. is planning to introduce a new product called H-5. The product details are as follows: Based on the market considerations, the target selling price per unit would be $800. The company's target profit margin on sales for all new products is 25% of sales. The initial estimate to manufacture one unit of H-5 includes: direct material $230; direct labour $125 and the manufacturing overhead to be applied at 80% of direct labour cost. The estimated upstream and downstream costs and the estimated sales of the proposed model H-5 are as follows: Year 3 Year 4 Year 5 Year 1 Year 2 Research and Development $3,960,000 Product and process design $1,560,000 $792,000 Marketing $888,000 Customer support $360,000 Expected sales (units) 16,560 $600,000 $1,008,000 9,120 $504,000 $720,000 4,320 $312,000 Required: a. Prepare a Year 1 to Year 5 Life Cycle Budget for the H-5 model and use this budget to estimate the average unit cost. On this basis, would you recommend the development and introduction of the H-5 model? Explain. (16 marks) b. Briefly explain the ways in which the company could apply the principles of life cycle management to reduce the manufacturing cost of the H-5 model. (4 marks)