Answer the following questions using the information below:
Purple Purpose Inc., is in the process of evaluating a new product using the following information:
• A new transformer has two production runs each year, each with $10,000 in setup costs.
• The new transformer incurred $30,000 in development costs and is expected to be produced over the next three years.
• Direct costs of producing the transformers are $40,000 per run of 4,500 transformers each.
• Indirect manufacturing costs charged to each run are $45,000.
• Destination charges for each transformer average $1.00.
• Customer service expenses average $0.20 per transformer.
• The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
• Sales units equal production units each year.
-What are estimated life-cycle revenues?
A) $225,000
B) $477,000
C) $729,000
D) $756,000

Question

Quizplus · Accepted Answer

The estimated life-cycle revenues can be calculated by finding out the total revenue for each year and adding them up over the three years. 
Year 1: 4,500 x $25 = $112,500
Year 2: 4,500 x $28 = $126,000
Year 3: 4,500 x $31 = $139,500
Total estimated life-cycle revenues = $112,500 + $126,000 + $139,500 = $378,000 x 2 (since there are two production runs per year) = $756,000.

Therefore, the answer is D.

Answer the Following Questions Using the Information Below