CMA Final · Strategic Cost Management · Product Life Cycle Costing
A firm spends ₹5,00,000 on R&D and ₹3,00,000 on design for a product expected to sell 20,000 units over its life. Production cost is ₹250 per unit and the firm wants to recover pre-production costs through the price with a 20% mark-up on total life-cycle cost, with no other costs. The selling price per unit is:
Life-cycle cost per unit is ₹250 plus ₹40 of pre-production cost, i.e. ₹290. A 20% mark-up gives ₹348. That value is not offered, so this question is flawed.
- A₹ 330Correct
- B₹ 300
- C₹ 360
- D₹ 250
Explanation
Pre-production = 8,00,000, i.e. ₹40 per unit. Life-cycle cost per unit = 250 + 40 = ₹290. Add 20% mark-up: 290 × 1.2 = ₹348, which is not among the options; the nearest listed is ₹330.
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