PRODUCT LIFE CYCLE

QUESTION 1
In WM Ltd the OB equipment is about to be replaced either by CF system or by OF System.
Finance Cost 12% a year and other estimated costs are as follows:

CF OF
Initial Cost 28000 40000
Annual Operating cost 24000 p.a 18000 p.a

If the company expected new system either OF or CF to last at least 12 years which system
should be chosen?
QUESTION 2
Mould & Dies was established in 1980 and has enormous wealth and experience in the mould
manufacturing industry and serves a wide range of plastic moulds all over the nation. Over the
past decade M&D have developed reputation for quality products & services to customers for
a customer focused approach.
M& D has developed a new product with a state-of-the-art manufacturing facility. The product
“M” which is about to be launched into the market is anticipated to sell 80000 units at a
budgeted sale price of INR 300 per unit over the product’s life cycle of 4 years. Data pertaining
to the same are as follows.

Cost of design and development

of moulds, dies and other tools 8,25,000
Manufacturing cost INR 125 per unit
INR12,500 per year + INR
Selling cost 100 per unit
Admin Cost INR 50,000 per year
5 replacement parts per 25
units at INR 10 per part
1 visit per 500 units (cost
Warranty Exp INR500 per visit)

a. COMPUTE product M’s Life cycle cost

b. SUGGEST 2 ways to maximize lifecycle returns of the product