A company is planning a new product. Market research suggests that demand for the product would last for 5 years. At a selling price of OMR 21.00 per unit they expect to sell 4,000 units in the first year, 6,000 units in the second year and 10,000 units in each of the other 3 years. The company wishes to achieve a mark-up of 50% on cost. It is estimated that the lifetime costs of the product will be as follows: Manufacturing costs – OMR 12.00 per unit Design and development costs – OMR 120,000 End of life costs – OMR 60,000 You are required to calculate:- The lifecycle cost per unit & in total and determine whether or not the product is worth making.

A company is planning a new product. Market research suggests that demand for the product would last for 5 years. At a selling price of OMR 21.00 per unit they expect to sell 4,000 units in the first year, 6,000 units in the second year and 10,000 units in each of the other 3 years. The company wishes to achieve a mark-up of 50% on cost. It is estimated that the lifetime costs of the product will be as follows: Manufacturing costs – OMR 12.00 per unit Design and development costs – OMR 120,000 End of life costs – OMR 60,000 You are required to calculate:- The lifecycle cost per unit & in total and determine whether or not the product is worth making.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 4P

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