Bunch Manufacturing is considering producing a new product.Bunch Manufacturing expects to sell 2,000 units over the product's expected 4-year life.Variable production costs and variable selling costs are estimated at $42 and $16 per unit, respectively.Annual fixed production and fixed selling costs are estimated at $15,000 and $5,000, respectively.Research and development costs are estimated at $184,000._____ is the total cost over the product life cycle.
A)$116,000
B)$196,000
C)$264,000
D)$380,000

Question

Quizplus · Accepted Answer

Total variable costs per unit = $42 + $16 = $58 
Total fixed costs per year = $15,000 + $5,000 = $20,000

Total fixed costs over the product's expected 4-year life = $20,000 x 4 = $80,000

Total variable costs over the product's expected 4-year life = $58 x 2,000 x 4 = $464,000

Total cost over the product life cycle = $80,000 + $464,000 + $184,000 = $728,000

Therefore, the total cost over the product life cycle is $380,000 (Option D).

Bunch Manufacturing Is Considering Producing a New Product