2 3 4 1 Life Cycle Pricing - (20 Points Each) Cougar Fabricators plans to introduce...

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2 3 4 1 Life Cycle Pricing - (20 Points Each) Cougar Fabricators plans to introduce a new machine next year. This product has a two-year production life and an estimated target demand of 18 units quarterly. The product will be produced 12 weeks per quarter (or 48 weeks per year). Cougar Fabricators estimates the following costs: 5 Direct materials will be $16,500 per unit. 6 7 Setup costs will be $1,500 per set up, twelve setups will be required per week. Specialized equipment must be rented for $10,000 per week. 8 9 10 3rd Party Quality inspection performed each quarter at $10,000 per quarter. Random Compliance inspector (1) will oversea the shop operation 1 week per quarter at $120 per hour; this one inspector will have oversight of all of the employees during this work week and work the same hours of the employees for the given week. 11 Engineering and Design costs are estimated to be $54,000 12 Research and development costs are estimated at $486,000 13 Labor will be paid at $55 per hour. 14 15 16 17 18 19 20 21 22 23 24 Eight employees will be assigned to this product and each employee will work 38.5 hours per week on the product. They will work at this rate during the entire two year production life of the product. Disregard the taxes that are due. Instead use the gross payroll for this line. Cougar Fabricators uses cost-plus pricing whereby the selling price of each of its products is 175 percent of the life-cycle costs. Determine the selling price of the product. Show your work, show all of your variables of the problem and calculate everything within excel to see the formulas you use to come up with your answers 25 26 2 3 4 1 Life Cycle Pricing - (20 Points Each) Cougar Fabricators plans to introduce a new machine next year. This product has a two-year production life and an estimated target demand of 18 units quarterly. The product will be produced 12 weeks per quarter (or 48 weeks per year). Cougar Fabricators estimates the following costs: 5 Direct materials will be $16,500 per unit. 6 7 Setup costs will be $1,500 per set up, twelve setups will be required per week. Specialized equipment must be rented for $10,000 per week. 8 9 10 3rd Party Quality inspection performed each quarter at $10,000 per quarter. Random Compliance inspector (1) will oversea the shop operation 1 week per quarter at $120 per hour; this one inspector will have oversight of all of the employees during this work week and work the same hours of the employees for the given week. 11 Engineering and Design costs are estimated to be $54,000 12 Research and development costs are estimated at $486,000 13 Labor will be paid at $55 per hour. 14 15 16 17 18 19 20 21 22 23 24 Eight employees will be assigned to this product and each employee will work 38.5 hours per week on the product. They will work at this rate during the entire two year production life of the product. Disregard the taxes that are due. Instead use the gross payroll for this line. Cougar Fabricators uses cost-plus pricing whereby the selling price of each of its products is 175 percent of the life-cycle costs. Determine the selling price of the product. Show your work, show all of your variables of the problem and calculate everything within excel to see the formulas you use to come up with your answers 25 26