Cima P2 Exam Question No 18

Question No 18:

Explain the likely changes that will occur in the unit selling prices AND in the unit production costs, compared to the preceding stage.(ii) Maturity stages of the new product's life cycle.

Unit selling prices
These are unlikely to be reducing any longer as the product has become established in the market place. This is a time for consolidation and while there may be occasional offers to tempt customers to buy the product the selling price is likely to be fairly constant during this period.
Unit production costs
Direct material costs are likely to be fairly constant in this stage. They may even increase as the quantities required diminish compared to those required in the growth stage, with the consequential loss of negotiating power.
Direct labour costs are unlikely to be reducing any longer as the effect of the learning and experience curves has ended. Indeed the workers may have started working on the next product so that their attention towards this product has diminished with the result that direct labour costs may increase.
Overhead costs are likely to be similar to those of the end of the growth stage as optimum batch sizes have been established and are more likely to be used in this maturity stage of the product life cycle where demand is more easily predicted.