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Dixon Porter Co., which uses life cycle costing, is considering the manufacture of a product with a 5-year life cycle that will require spending $1,000,000 for R&D and $2,000,000 for design and testing. Annual fixed and unit variable costs for the product and projected average annual unit sales at three selling prices are given below:  At the highest price, R&D costs will increase by $500,000 and design and testing costs by $1,000, Moreover, fixed customer service costs will rise by $30,000 per year, and variable customer service costs will rise by $25 per unit. At the lowest price, fixed marketing and distribution costs will decrease by $30,000 per year.Which unit sales price should Dixon Porter Co.select to obtain the maximum profit over the product’s 5-year life cycle? Which unit sales price should Dixon Porter select to obtain the maximum profit over the product’s 5-year life cycle?A. $750 B. $900 C. $1,125 D. No profit can be earned. |