Question 1

Section B - Case 1: AeroYield

AeroYield is a technology startup developing specialized drones for the agriculture sector to monitor crop health. The company is preparing to launch its new model, the 'AgriScout'. Market research indicates that customers are willing to pay $8,000 for the AgriScout. AeroYield's investors require a profit margin of 25% on the selling price.

The current estimated production cost for the AgriScout is $6,400 per unit.

AeroYield is also considering the lifecycle costs of the AgriScout. Over its 3-year life, total R&D costs will be $500,000, total marketing costs $200,000, and end-of-life disposal costs $50,000. Total production volume is expected to be 1,000 units. The variable production cost is $6,400 per unit.

What is the lifecycle cost per unit of the AgriScout?

Accepted Answer

Sum all costs incurred over the product's life (R&D, marketing, disposal, and total variable production costs). Divide the grand total by the total number of units.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to include the end-of-life disposal costs, or only looking at production costs.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 1

More questions from this exam