egin. At this point, a stable support structure will be developed for the production, marketing, warehousing and distribution, product support, and ongoing research and development efforts at SmartWave, Inc. At that point, production costs for the SmartWave will be based on a standard product cost model. This cost model includes fixed costs, semi-fixed costs, and variable cost elements. The following paragraphs describe each of these cost elements and target values for the SmartWave.4.1.2.1 Fixed CostsFixed costs, also known as General and Administrative (G&A) costs, include costs associated with the management structure of SmartWave, Inc., product marketing and advertising costs, and costs of ongoing product development efforts. Fixed costs are independent of production quantity, and are targeted to be $7.5 million per year for the first 5 years of the companys life cycle. The following summarizes the breakdown of these costs. Refer to 2001.fin.10021 for a detailed breakdown.4.1.2.2 Semi-Fixed CostsSemi-fixed costs, also known as overhead costs, are those costs which are independent of production quantity over a fairly wide range. For example, manufacturing and warehouse facilities costs, production supervisors salaries, and shipping costs are all semi-fixed costs. Based on production quantities of 100,000 units, these costs are targeted as follows. Refer to 2001.fin.10021 for more detail4.1.2.3 Variable CostsVariable costs are those costs which are directly related to the quantity of units produced, and are sometimes called direct costs. These costs are broken down into parts and materials costs, subcontracted item costs, and labor costs for assembly, testing, and packaging. The following is a breakdown of variable costs by category, again based on production quantities of 100,000 units. Document 2001.fin.10021 provides a detailed cost breakdown within each category.4.2 Market Pricing TargetsThe following paragraphs descr...
