Bicker,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 5,000 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.
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

Quizplus · Accepted Answer

The Answer of Bicker,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 5,000 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.
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?