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Mext is a company that design, manufactures and sells luxury furniture with a twist. One year ago, the company launched a set of barstools that retails for $$200$ each. In the past year, Mext has generated a profit margin of $30\%$ of the retail price. However, a competitor recently released a similar product for $20\%$ cheaper.

Based on a closer inspection of the costs associated with the barstools, the management accountant of Mext produced the following costs over the $4$ year life cycle of the barstool

Research and Development Costs Year $0$: $$300,000$

Design Cost Year $0$: $$300,000$

Year $1$: $$200,000$

Direct Materials $$75$ per unit

Direct Manufacturing Labour $$30$ per unit

Manufacturing Overhead $$30$ per unit

Marketing Year $0$: $$150,000$

Year $1$: $ $80,000$

Year $2$: $ $30,000$

Customer Support Year $1$: $ $60,000$

Year $2$: $$100,000$

Year $3$: $ $40,000$

The forecasted sales over the four years are as follows.

Year $15000$

Year $210000$

Year $33000$

Required:

$1.$ Calculate the target cost for the barstools that will meet the target selling price?

$(2$ marks$)$

$2.$ Prepare a life cycle budget for Mext barstools over the four years?

$(8$ marks$)$

$3.$ Calculate the unit cost of producing the barstool over the life cycle of the product? Why is the calculation of the unit cost based on the above manufacturing overhead inaccurate?

$(4$ marks$)$

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