ACCA PM · Chapter 3 · Question 5 of 9
A new product is expected to sell 50,000 units over its life. Development costs will be $400,000, total marketing costs $250,000, variable production costs $12 per unit and decommissioning costs at the end of its life $50,000. What is the life-cycle cost per unit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $26.00
Explanation
Total life-cycle cost = $400,000 + $250,000 + (50,000 x $12) + $50,000 = $1,300,000. Life-cycle cost per unit = $1,300,000 / 50,000 = $26.00.
More Target costing and life-cycle costing MCQs
- Q7At which stage of a product's life are the majority of its life-cycle costs committed (locked in)?
- Q8Which of the following is a benefit of life-cycle costing compared with traditional period-based cost reporting?
- Q9During which stage of the product life cycle is a product likely to face slowing sales growth, intense price competition and a focus on…
- Q1A company plans to launch a product at a market price of $80. It requires a profit margin of 25% of the selling price. The current…
- Q2A product will sell for $90. The company requires a mark-up of 25% on cost. The current estimated cost is $75 per unit. What is the cost…