MUHAMMAD MUHAMMAD ADEEL ADEEL RANA 18-28021
Estimate what fraction of the price of a pocket calculator is required to cover the cost of developing the product. To do this you might start by estimating the information needed to fill out Exhibit 1-3 for the pocket calculator.
Annual production volume = 500,000 units per year Sales lifetime = 4 years Sales Price = $15 Number of unique parts = 20 Development time = 1 year Internal development team (peak size) = 4 people External development team (peak size) = 8 people Development Cost = $2,080,000 Production investment = $2,080,000
Finance Details: Fixed cost:
Land
5,000,000
Building
6,000,000
Machinery
70,000,00
Preliminary Expenses
10,000
Contingency
10,000
Total
$ 2,000,000
Variable cost:
Raw material
20,000
Wages
30,000
Bills
10,000
Tax
10,000
Depreciation Total
10,000 $80,000
Break Even Analysis:
Breaken= Fixed Cost/Selling price*no of units – variable cost =2,000,000/15*50,000 – 80,000 =3 years
