Penji Corporation is considering starting research and development on a new product with a 15-year life. Development and manufacturing setup will cost $12,000,000. Once production starts, direct materials will cost $12 per unit, and each unit will use 0.5 hour of direct labor at $15 per hour. Variable manufacturing overhead is applied at a rate of $10 per direct labor hour. The only fixed manufacturing overhead expense that will be affected is depreciation on the equipment purchased during manufacturing setup. Penji plans to spend $100,000 per year on marketing, advertising, and administration. Penji believes that demand for the product will be 100,000 the first year, will increase by 25% each of the next 2 years, then decrease by 10% each year thereafter. Calculate the total costs of the product over its life cycle.
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