Fit Co specialises in the manufacture of a small range of hi-tech products for t

Question

Fit Co specialises in the manufacture of a small range of hi-tech products for the fitness market. They are currently considering the development of a new type of fitness monitor, which would be the first of its kind in the market. It would take one year to develop, with sales then commencing at the beginning of the second year. The product is expected to have a life cycle of two years, before it is replaced with a technologically superior product. The following cost estimates have been made. Year 1 Year 2 Year 3 Units manufactured and sold 100,000 200,000 Research and development costs 160,000 Product design costs 800,000 Marketing costs 1,200,000 1,000,000 1,750,000 Manufacturing costs: Variable cost per unit 40 42 Fixed production costs $650,000 1,290,000 Distribution costs: Variable cost per unit 4 4

Explanation / Answer

82.30

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