Guti company is planning a new product and market research has revealed that the product should sell 10,000 units at $21 per unit. The company seeks to make a mark-up of 40% product cost. It is estimated that the life time costs of the product will be as follows:

Design and development costs $50,000.

Manufacturing cost $10 per unit.

End of life costs $20,000.

The company estimates that if it were to spend an additional $15,000 on design in a bid to promote environmentally friendly manufacturing processes, the manufacturing costs per unit would be reduced.

Required
Calculate the target cost of the product.  

What is the original life cycle cost per unit, and is the product worth making on that basis?

If the additional amount were spent on design, what   is the maximum manufacturing cost per unit that could be tolerated if the company is to earn the required mark up ?