Nutty Manufacturing is considering producing a new product. Nutty Manufacturing expects that it will sell 2,000 units over the product's expected 4- year life. Variable production costs and variable selling costs are estimated at $42 and $16 per unit, respectively. Annual fixed production and fixed selling costs are estimated at $15,000 and $5,000, respectively. Research and development costs are estimated at $184,000. is the total cost over the product life cycle.

Question

Quizplus · Accepted Answer

The total cost over the product life cycle includes variable costs, fixed costs, and research and development costs. Variable costs per unit are $42 (production) + $16 (selling) = $58. For 2,000 units, variable costs are 2,000 * $58 = $116,000. Fixed costs over 4 years are ($15,000 + $5,000) * 4 = $80,000. Adding research and development costs of $184,000, the total cost is $116,000 + $80,000 + $184,000 = $380,000.

Nutty Manufacturing Is Considering Producing a New Product