Bronry Box Company is evaluating a new product that may be introduced in the upcoming year. The
Question:
Bronry Box Company is evaluating a new product that may be introduced in the upcoming year. The product is a new insulated box that will be used by food distributors. The company is planning to make the new boxes in 12 production runs a year of 1,000 boxes each. Each production run will incur \($3,000\) in costs to change over the equipment for this new style of box. At this date, the insulated box has incurred \($12,000\) in research and development costs. The other costs of producing the boxes are \($5\) for direct materials, \($1\) for direct labour, and \($2\) for overhead. Shipping and customer service costs will be \($1\) per box. The boxes are going to sell for \($15\) each for Year 1, \($15.50\) for Year 2, and \($16.00\) for Year 3. What is the life-cycle operating income for the insulated box?
a. $114,000
b. $126,000
c. $96,000
d. $104,000
Step by Step Answer:
Accounting For Managers Interpreting Accounting Information For Decision Making
ISBN: 9781118037966
1st Canadian Edition
Authors: Paul M. Collier, Sandy M. Kizan, Eckhard Schumann