Life Cycle Problem

Required: Insert the appropriate life-cycle stage in the space provided after each activity. Problem 2 (Life-Cycle Costing) The following revenue and the cost data are for Round Manufacturing's to radial saws. The RM 200 is for the commercial market and the RM 800 is for industrial customers. Both products are expected to have three-year life cycles. Revenue Costs Research and development Prototypes Marketing Distribution Manufacturing Customer service Income Year 1 P 500,000 1,000,000 300,000 60,000 80.000 20,000 -0- P(960,000) RM200 Year 2 Year 3 P2,000,000 P2,500,000 -0- -0- 50,000 -0- 320,000 475,000 120,000 130,000 800.000 1.000.000 60.000 85.000 P 650,000 P 810,000 220 Cost Planning for Product Life Cycle ... Revenue Costs Research and development Prototypes Marketing Distribution Manufacturing Customer service Income Year 1 P 900,000 1,150,000 550,000 124,000 170,000 85,000 -0- P(1,179,000) RM800 Year 2 P1,800,000 -0- 30,000 200,000 300,000 600,000 20.000 P 650,000 Year 3 P2,000,000 -0- 10,000 260,000 410,000 700,000 10.000 P 610,000 Required: 1. How would a product life-cycle income statement differ from this calendar- year income statement? 2. Prepare a three-year life-cycle income statement for both products, Which product appears to be more profitable? 3. Prepare a schedule showing each cost category as a percentage of total annual costs. Pay particular attention to the research and development and customer service categories. What do you think this indicates about the profitability of each product over the three-year life cycle? Problem 3 (Target Costing in a Service Firm)