The sales forecast is based on projected levels of demand. All the numbers are expressed in today’s dollars.
Price per bus $220,000
Units sold per year 12,250
Labor cost per bus $32,500
Components & Parts $86,500
Selling General & Administrative $200,000,000
The average warranty cost per year per bus for the first five years is $2,000. The present value of this cost will be used as a cost figure for each bus. Afterwards, the bus operator will become responsible the repairs on the buses. The buses can be produced for 15 years. Afterwards, the designs become obsolete.