ACCA MA · Chapter 9 · Question 11 of 11
A product is expected to sell 100,000 units over its life. Expected costs are: design and development $400,000, variable production cost $12 per unit, marketing $150,000 and decommissioning $50,000. What is the life-cycle cost per unit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $18.00
Explanation
Total life-cycle cost = 400,000 + (100,000 x 12) + 150,000 + 50,000 = $1,800,000. Per unit = 1,800,000 / 100,000 = $18.00. Leaving out the design costs gives $14.00, and leaving out decommissioning gives $17.50.
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