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What is the total target cost for this products life

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Reference no: EM13492248

Praeuner Company has surveyed the market and set a target selling price of $2,000 per unit for its product. Praeuner believes it can sell 100,000 units of this product over its two-year life. Praeuner requires a 20 percent return on selling price. Therefore its target cost per unit is $1,600. Praeuner has gathered the following budgeted cost data:

Unit cost

$ 1,200

Batch cost (batch size = 1,000)

15,000

Product-sustaining cost (annual)

480,000

Facility-sustaining cost (annual)

900,000

In addition to the previous costs, Praeuner will incur $5,000,000 in research and development costs before the product is manufactured.

Required:

  •  
    • A.        What is the total target cost for this product's life?
    • B.        What is the total budgeted cost for this product over its two-year life?
    • C.        Should Praeuner develop this product? Why?

 

Reference no: EM13492248

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