Solution-Calculate the cost per unit looking at the whole

Calculate the cost per unit looking at the whole lifecycle

Reference no: EM13557934

A company manufactures MP3 players. It is planning to introduce a new model and development will begin very soon. It expects the new product to have a life cycle of 3 years and the following costs have been estimated.

Units manufactured and sold	Year 0	Year 1 25,000	Year 2 100,000	Year 3 75,000
Price per unit		$90	$80	$70
R&D costs	$850,000	$90,000	-	-
Production costs Variable cost per unit		$30	$25	$25
Fixed costs		$500,000	$500,000	$500,000
Marketing costs Variable cost per unit		$5	$4	$3
Fixed costs		$300,000	$200,000	$200,000
Distribution costs Variable cost per unit		$1	$1	$1
Fixed costs		$190,000	$190,000	$190,000
Customer service costs per unit		$3	$2	$2

Required

a) Explain life cycle costing and state what distinguishes it from more traditional management accounting techniques.

b) Calculate the cost per unit looking at the whole lifecycle and comment on the price to be charged.

Reference no: EM13557934

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Calculate the cost per unit looking at the whole lifecycle

Reference no: EM13557934

Reference no: EM13557934

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