Henderson Company is in the process of evaluating a new part using the following information.
Part SLC2002 has one production run each month, each with $16,000 in setup costs.
Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
Indirect manufacturing costs charged to each run are $88,000.
Destination charges for each run average $18,000.
Part SLC2002 is selling for $12.50 in the Canada and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
Sales units equal production units each year.
Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income if the product life cycle is one year?

Question

Henderson Company is in the process of evaluating a new part using the following information.
 Part SLC2002 has one production run each month, each with $16,000 in setup costs.
  Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
  Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
  Indirect manufacturing costs charged to each run are $88,000.
  Destination charges for each run average $18,000.
  Part SLC2002 is selling for $12.50 in the Canada and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
  Sales units equal production units each year.
Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income if the product life cycle is one year?

Quizplus · Accepted Answer

The Answer of Henderson Company is in the process of evaluating a new part using the following information.
 Part SLC2002 has one production run each month, each with $16,000 in setup costs.
  Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
  Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
  Indirect manufacturing costs charged to each run are $88,000.
  Destination charges for each run average $18,000.
  Part SLC2002 is selling for $12.50 in the Canada and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
  Sales units equal production units each year.
Required:
a. What are the estimated life-cycle revenues?
b. What is the estimated life-cycle operating income if the product life cycle is one year?

Henderson Company Is in the Process of Evaluating a New