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
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. That is the life-cycle operating income for the insulated box?
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