ACCA Applied Knowledge · Management Accounting · Alternative cost accounting principles
A product is expected to sell 10,000 units over its life at $20 per unit. Lifetime costs are: design and development $40,000; production $8 per unit; marketing $30,000; and end-of-life disposal $10,000. What is the expected lifetime profit?
Lifetime profit is $40,000. Revenue of $200,000 less total lifetime costs of $160,000, comprising design $40,000, production $80,000, marketing $30,000 and disposal $10,000, gives this result.
- A$40,000Correct
- B$80,000
- C$30,000
- D$20,000
Explanation
Revenue = 10,000 x $20 = $200,000. Costs = 40,000 + (10,000 x 8 = 80,000) + 30,000 + 10,000 = $160,000. Profit = $40,000. Omitting disposal would give $50,000 and omitting design would give $80,000.
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