Dastan Products makes digital watches. Dastan is preparing a product-life-cycle budget for a new watch, SPR21. Development of new watch is to start shortly. Estimates for SPR21 are as follows: Life-cycle units manufactured and sold 400,000 Selling price per watch $ 40 Life-cycle costs R&D and design $ 1,000,000 Manufacturing Variable cost per watch $ 15 Variable cost per batch $ 600 Watches per batch 500 Fixed costs $ 1,800,000 Marketing Variable cost per watch $ 3.20 Fixed costs $ 1,000,000 Distribution Variable cost per batch $ 280 Watches per batch 160 Fixed costs $ 720,000 Customer-service cost per watch $1.50 Calculate the budgeted life-cycle operating income for the new watch What percentage of the budgeted total product life-cycle costs will be incurred by the end of the R&D and design stages? An analysis reveals that 80% of the budgeted total product life-cycle costs of the new watch will be locked in at the R&D and design What are the implications for managing SPR21 costs? Dastan’s Market Department estimates that reducing SPR21’s price by $3 will increase the life-cycle sales by 10%. If unit sales increase by 10%, Dastan plans to increase manufacturing and distribution batch sizes by 10% as Assume that all variable costs per watch, variable costs per batch, and all fixed costs will remain the same. Should Dastan reduce SPR21’s price by $3? Demonstrate your calculations
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Dastan Products makes digital watches. Dastan is preparing a product-life-cycle budget for a new watch, SPR21. Development of new watch is to start shortly. Estimates for SPR21 are as follows:
|
Life-cycle units manufactured and sold |
400,000 |
|
Selling price per watch |
$ 40 |
|
Life-cycle costs |
|
|
R&D and design |
$ 1,000,000 |
|
Manufacturing |
|
|
Variable cost per watch |
$ 15 |
|
Variable cost per batch |
$ 600 |
|
Watches per batch |
500 |
|
Fixed costs |
$ 1,800,000 |
|
Marketing |
|
|
Variable cost per watch |
$ 3.20 |
|
Fixed costs |
$ 1,000,000 |
|
Distribution |
|
|
Variable cost per batch |
$ 280 |
|
Watches per batch |
160 |
|
Fixed costs |
$ 720,000 |
|
Customer-service cost per watch |
$1.50 |
- Calculate the budgeted life-cycle operating income for the new watch
- What percentage of the budgeted total product life-cycle costs will be incurred by the end of the R&D and design stages?
- An analysis reveals that 80% of the budgeted total product life-cycle costs of the new watch will be locked in at the R&D and design What are the implications for managing SPR21 costs?
- Dastan’s Market Department estimates that reducing SPR21’s price by $3 will increase the life-cycle sales by 10%. If unit sales increase by 10%, Dastan plans to increase manufacturing and distribution batch sizes by 10% as Assume that all variable costs per watch, variable costs per batch, and all fixed costs will remain the same. Should Dastan reduce SPR21’s price by $3? Demonstrate your calculations
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