CMA Final · Strategic Cost Management · Product Life Cycle Costing
Sundaram Appliances expects a product to have these life cycle costs: R&D Rs 12,00,000; design Rs 8,00,000; production Rs 40 per unit; marketing and distribution Rs 15,00,000 in total; customer service and disposal Rs 5,00,000 in total. Total lifetime sales are 50,000 units. What is the life cycle cost per unit?
The life cycle cost per unit is Rs 120. Total life cycle cost is Rs 60 lakh: Rs 40 lakh of fixed upfront and support costs plus Rs 20 lakh production cost. Dividing by 50,000 lifetime units gives Rs 120.
- ARs 124Correct
- BRs 80
- CRs 120
- DRs 140
Explanation
Production = 50,000 x 40 = Rs 20,00,000. Total = 12,00,000 + 8,00,000 + 20,00,000 + 15,00,000 + 5,00,000 = Rs 60,00,000. Per unit = 60,00,000/50,000 = Rs 120. Checking: 12+8+15+5 = 40 lakh, divided by 50,000 = Rs 80, plus Rs 40 = Rs 120. So the option Rs 124 is a mistake; the correct figure is Rs 120.
Did you get it right without looking?
One question tells you little. A timed set on Product Life Cycle Costing shows your real accuracy, how long you take and where you lose marks.
More Product Life Cycle Costing questions
- In which stage of the product life cycle are marketing costs typically highest relative to sales, because of advertising and distribution bu…
- A product has total life cycle costs of Rs 120 lakh over 4 years, of which Rs 30 lakh is incurred before launch. Design decisions made in th…
- A firm finds that about 70% of a product's life cycle cost is committed during design, although only about 10% has been spent by then. What …
- Vihaan Electronics launches a gadget. Total life cycle revenue is Rs 3,00,00,000 from 50,000 units. Upstream costs are Rs 40,00,000, product…
- A product's life cycle cost is the total of costs incurred from design through to withdrawal and support. Which of the following costs would…
- During which stage of the product life cycle do firms typically incur the highest promotional spend relative to sales while profits are nega…