Problem $5-61.$ Centeral Equipment makes a variety of motor$-$driven products for homes and small businesses. The market research department recently identified power lawn mowers as a potentially lucrative market. As a first entry into this market, Centeral is considering a riding lawn mower that is smaller and less expensive than those of most of the competition. Market research indicates that such a lawn mower would sell for about $$980$ at retail and $$795$ wholesale. At that price, Centeral expects life$-$cycle sales as follows:

$\backslash$table$[[$Year$,$Sales$],[20$ X $1,1,600],[20$ X $2,5,500],[20$ X $3,10,600],[20$ X $4,10,600],[20$ X $5,8,800],[20$ X $6,6,300],[20$ X $7,4,300]]$

The production department has estimated that the variable cost of production will be $$460$ per lawn mower, and annual fixed costs will be $$890,000$ per year for each of the $7$ years. Variable selling costs will be $840$ per lawn mower and fixed selling costs will be $855,000$ per year. In addition, the product development department estimates that $85\mathrm{.}2$ million of development costs will be necessary to design the lawn mower and the production process for it$.$

Compute the expected profit over the entire product life cycle of the proposed riding lawn mower.

Suppose Centeral expects pretax profits equal to $10\%$ of sales on new products. Would the company undertake production and selling of the riding lawn mower?

Centeral Equipment uses a target costing approach to new products. What steps would management take to try to make a profitable product of the riding lawn mower?