Bunkowske Company plans to introduce a new product next year. This product has a two-year life and an estimated demand of 20,000 units annually. The product will be produced 50 weeks each year. Bunkowske estimates the following costs:
• Direct materials will be $16 per unit.
• Setup costs will be $200 per week. Ten setups will be required per week.
• Design costs will be $40,000 in total.
• Specialized equipment must be rented for $15,000 per week.
• Research and development costs are estimated at $500,000.
• Labor will be paid $20 per hour. Five employees will be assigned to this product and each employee will work 35 hours on the product.
Bunkowske Company uses cost-plus pricing whereby the selling price of each of its products are 150 percent of the life-cycle costs. Determine the selling price of this product.
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