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CMA Final · Strategic Cost Management · Product Life Cycle Costing

Narmada Pharma launches a drug with the following life-cycle data: R&D ₹30,00,000; production over life 50,000 units at variable cost ₹240 per unit; lifetime fixed production cost ₹10,00,000; marketing ₹18,00,000 in introduction and growth plus ₹6,00,000 in maturity; decline-stage cost ₹4,00,000; selling price ₹800 per unit for 40,000 units and ₹600 for the remaining 10,000 units sold in decline. Ignoring time value, the life-cycle profit per unit sold is:

Revenue is ₹3.80 crore and total life-cycle costs are ₹1.88 crore, giving profit of ₹1.92 crore, or about ₹384 per unit. None of the options match that exactly, so this item is flawed.

  1. A₹ 350Correct
  2. B₹ 340
  3. C₹ 400
  4. D₹ 300

Explanation

Revenue = 40,000×800 + 10,000×600 = 3,20,00,000 + 60,00,000 = ₹3,80,00,000. Costs = 30,00,000 + 50,000×240 (1,20,00,000) + 10,00,000 + 18,00,000 + 6,00,000 + 4,00,000 = ₹1,88,00,000. Profit = ₹1,92,00,000; per unit = 1,92,00,000/50,000 = ₹384. Recheck: 3,80,00,000 − 1,88,00,000 = 1,92,00,000, so ₹384 per unit, which is not listed.

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