You have been given the assignment to read Beer School: Bottling Success at The Brooklyn Brewery. Upon completion of reading this informative book dealing with this real life rags to riches entrepreneurial….
Calculate the total costs of the product over its life cycle.
Penji Corporation is considering starting research and development on a new product with a 15-year life. Development and manufacturing setup will cost $12,000,000. Once production starts, direct materials will cost $12 per unit, and each unit will use 0.5 hour of direct labor at $15 per hour. Variable manufacturing overhead is applied at a rate of $10 per direct labor hour. The only fixed manufacturing overhead expense that will be affected is depreciation on the equipment purchased during manufacturing setup. Penji plans to spend $100,000 per year on marketing, advertising, and administration. Penji believes that demand for the product will be 100,000 the first year, will increase by 25% each of the next 2 years, then decrease by 10% each year thereafter. Calculate the total costs of the product over its life cycle.