CMA Final · Strategic Cost Management · Product Life Cycle Costing
Anaya Foods plans a product with a 5-year life. Pre-launch costs are Rs 12,00,000. Annual sales are 20,000 units at Rs 300 with variable cost Rs 180 per unit and annual fixed cost Rs 8,00,000. Ignoring time value, what is the total life cycle profit?
The correct life cycle profit computes to Rs 68,00,000, which is not among the options listed.
- ARs 28,00,000Correct
- BRs 40,00,000
- CRs 20,00,000
- DRs 52,00,000
Explanation
Annual contribution = 20,000 x (300-180) = Rs 24,00,000. Less fixed Rs 8,00,000 = Rs 16,00,000 per year. Over 5 years = Rs 80,00,000. Less pre-launch Rs 12,00,000 = Rs 68,00,000. This does not match the options, so the key is unreliable.
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