Westland Manufacturing, Inc., plans to develop a new industrial motor. The product will take 6 months to design and test. The company expects the motor to sell 14,000 units during the first 6 months of sales; 26,000 units per year over the following 2 years; and 9,000 units over the final 6 months of the product's life cycle The company expects the following costs: (Click the icon to view the cost information.) Read the requirements Requirement 1. If Westland prices the motors at $400 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? Determine the operating income over the product's life cycle. Begin with the variable costs and then the fixed costs, along with the total life cycle operating income. Projected Life Cycle Income Statement Requirements Variable costs: 1. If Westland prices the motors at $400 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Westland is concerned about the operating income it will report in the first sales phase. It is considering pricing the motor at $425 for the first 6 months and decreasing the price to 5400 thereafter. With this pricing strategy, Westland expects to sell 13,500 units instead of 14.000 units in the first 6 months, 25,000 each year over the next 2 years, and 9,000 over the last 6 months. Assuming the same cost structure given in the problem, which pricing strategy would you recommend? Explain. Total variable costs Fixed costs: Print Done Total fixed costs Life cycle operating income What is the operating income per unit? (Round your answer to the nearest cent.) The operating income per unit is Requirement 2. Westland is concerned about the operating income it will report in the first sales phase. It is considering pricing the motor at $425 for the first 6 months and decreasing the price to $400 thereafter. With this pricing strategy, Westland expects to sell 13,500 units instead of 14,000 units in the first 6 months, 25,000 each year over the next 2 years, and 9,000 over the last 6 months. Assuming the same cost structure given in the problem, which pricing strategy would you recommend? Explain. Determine the operating income over the product's life cycle under the new assumptions. Begin with the variable costs and then the fixed costs, along with the total life cycle operating income. Data table Projected Life Cycle Income Statement X Variable costs: Total Fixed Cost Variable Cost Period Cost for the Period per Unit Months 0-6 $ 525,000 1,400,000 Months 7-12 $ $75 per unit Design costs Production Marketing Distribution Production $ Total variable costs 1,200,000 $ Fixed costs: $14 per unit Months 13-36 $ 225,000 5,300,000 2.370,000 $55 per unit $ Marketing Distribution $ 710,000 $9 per unit $ 875,000 $50 per unit $ Total fixed costs Months 37-42 Production Marketing Distribution Ignore the time value of money. 490,000 145,000 $ $10 per unit Life cycle operating income (Round your answer to the nearest cent.) The operating income per unit is Assuming the same cost structure given in the problem, which pricing strategy would you recommend? Explain. Print Done Westland earns more profit under its v plan. The in sales as a result of increasing the price V operating income. Therefore, Westland should price the motors at for the first six months
