Question $2(15$ Marks$)$ Examine the details provided below and answer the following questions. $(4)(5)(6)$ INFORMATION Digital Health Matrix Inc. $($DHM$)$ specialises in the manufacturing of smartwatches designed to monitor users' heart rate, blood pressure, and blood oxygen levels, while also tracking overall fitness. Currently, the firm is in the developmental phase of a groundbreaking smartwatch model. This new device is poised to offer enhanced features and functionalities, alongside sleeker, lighter, and more user$-$friendly designs. With an anticipated product life cycle of two years, DHM has conducted extensive market research to establish a target selling price and project lifetime sales volumes for the product. Additionally, cost estimates have been meticulously prepared, aligning with the proposed product specifications. Employing life cycle costing methodology, DHM determines target costs for its products by averaging costs across the entire product lifecycle, ensuring accuracy and consistency. The management accountant at DHM strongly believes that the successful implementation of cost reduction strategies will not only bolster the company's competitiveness but also enhance its profitability in the smartwatch market. This strategic approach will enable the firm to offer high$-$quality products at attractive price points while maintaining satisfactory profit margins. You are provided with the following relevant information for the smartwatch: Projected lifetime sales volume $100000$ units Target selling price per unit R$7500$ Target profit margin $(40\%$ selling price$)$ R$3000$ Target cost per unit R$4500$ Estimated lifetime cost per unit $($see note below for detailed breakdown$)$ R$5400$ Note: Estimated lifetime cost per unit: R R Manufacturing costs: Direct material $($bought in parts$)1200$ Direct labour $780$ Machine costs $630$ Quality control costs $300$ Rework costs $903000$ Non$-$manufacturing costs: Product development costs $1350$ Marketing costs $10502400$ Estimated lifetime cost per unit $5400$ The average market price for a smartwatch is currently R$5100.$ The company needs to close the cost gap of R$900$ between the target cost and the estimated lifetime cost. The following information has been identified as relevant: $1.$ Direct material cost: all of the parts currently proposed for the smartwatch are bespoke parts. However, most of these can actually be replaced with standard parts costing $55\%$ less. However, three of the bespoke parts, which currently account for $20\%$ of the estimated direct material cost, cannot be replaced, although an alternative supplier charging $10\%$ less has been sourced for these parts. $2.$ Direct labour cost: Initially, it was estimated that a total of $65000$ direct labour hours would be needed to produce all $100000$ units at a cost of R$1200$ per direct labour hour. However, after considering the effects of continuous improvement efforts and ongoing productivity gains at DHM$,$ the management accountant has revised his analysis. He now estimates that employees will require a total of $1902932$ minutes to produce all $100000$ units, with a revised cost of R$1040\mathrm{.}50$ per direct labour hour. $3.$ Rework cost: This is the average rework cost per smartwatch and is based on an estimate of $15\%$ of smartwatches requiring rework at a cost of R$600$ per rework. With the use of more standard parts, the rate of reworks will fall to $10\%$ and the cost of each rework will fall to R$560.$ REQUIRED: $2\mathrm{.}1.$ Recalculate the estimated lifetime cost per unit for the smartwatch by taking into account points $1$ to $3$ above. $(12)2\mathrm{.}2.$ Critically evaluate the potential ramifications of the revised estimated lifetime cost per unit on DHM$\text{'}$s smartwatch in the market, taking into account key factors such as pricing strategy, target profit margin, market demand, and competitive landscape. $(3)$