What price should be set for the product?

Catoosa Company is hoping to launch a new product that will cost $70 in direct materials and $80 in direct labor per unit. Startup and development costs should total $18,000,000, and fixed costs will be $200,000 per year. Variable manufacturing overhead is estimated at 75% of direct labor costs. Catoosa plans to pay its salespeople a 10% commission on the product. Catoosa hopes to earn a markup of 15% on full costs. Sales are expected to be 30,000 units in the first year. Unit sales are expected to rise by 10,000 units per year for the next 5 years, then drop 20,000 a year for 3 years, at which point the product is expected to be obsolete. What price should be set for the product?

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