Destin Products makes digital watches. Destin is preparing a product-life cycle budget for a new watch, MX3.  Development on the new watch is to start shortly.  Estimates for MX3 are as follows:

1.  Calculate the budgeted life-cycle operating income for the new watch.        
2.  What % of the budgeted total product life-cycle costs will be incurred by the end of        
3.  An analysis reveals that 80% of the budgeted product life-cycle costs of the new watch (MX3) are locked in at the R & D and Design stages.  What are the implications
for managing MX3's costs?
4.  Should Destin reduce MX3's price by $3 if sales will increase by 10% and manufacturing and distribution batch sizes will increase by 10%.

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Units of MX3 manufactured and sold 400,000 $40 Selling price per watch Life-cycle costs R & D and design costs $1,000,000 Manufacturing costs $15 Variable cost per watch Variable cost per batch $600 Watches per batch 500 $1,800,000 Fixed costs Marketing $3.20 Variable cost per watch $1,000,000 Fixed costs Distribution $280 Variable cost per batch Watches per batch 160 $720,000 Fixed costs $1.50 Customer-service cost per watch