Courteous Company developed the following budgeted life-cycle income statement for two proposed products.Each product's life cycle is expected to be two years. A 12 percent return on sales is required for new products.Because the proposed products did not have a 12 percent return on sales, the products were going to be dropped.
Relative to Product BB, Product AA requires more research and development costs but fewer resources to market the product.Sixty-five percent of the research and development costs are traceable to Product AA, and 40 percent of the marketing costs are traceable to Product AA.
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If research and development costs and marketing costs are traced to each product, life-cycle income for Product BB would be

Question

Courteous Company developed the following budgeted life-cycle income statement for two proposed products.Each product's life cycle is expected to be two years.  A 12 percent return on sales is required for new products.Because the proposed products did not have a 12 percent return on sales, the products were going to be dropped.
Relative to Product BB, Product AA requires more research and development costs but fewer resources to market the product.Sixty-five percent of the research and development costs are traceable to Product AA, and 40 percent of the marketing costs are traceable to Product AA.
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If research and development costs and marketing costs are traced to each product, life-cycle income for Product BB would be

Quizplus · Accepted Answer

In the budgeted life-cycle income statement, the net income for Product BB is $70,000 for the two-year life cycle. This is calculated by subtracting the sum of the total costs (including research and development and marketing) from the total revenue. Since no additional information is given to adjust the costs or revenue, the net income for Product BB remains the same as the budgeted amount.

Courteous Company Developed the Following Budgeted Life-Cycle Income Statement for Two