Imaging Technologies makes testing equipment used by forges and other manufacturers working with metal castings. The following data pertain to one of its recent products:
Design ............ $ 1,650,000
Preproduction tooling ....... $ 250,000
Manufacturing costs ...... $250 per unit
Selling and administration .... $125,000 per year + $200 per unit
Warranty expenses ....... 10 replacement parts per 50 units at $20 per part
2 visits per 1,000 units (cost $1,000 per visit)

Required:
a. Suppose Imaging expects to sell 40,000 of these units over the product’s life cycle of three years. Compute the product’s life-cycle cost.
b. Suppose Imaging could boost sales by 25% to 50,000 units if it implements a price reduction of $60 per unit or 10% of the original price. Should Imaging choose the lower price? Justify with supporting calculations.