Question
Dhahran Inc., is in the process of evaluating a new product using the following information: A new transformer has two production runs each year, each
Dhahran 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 $15,000 in setup costs.
The new transformer incurred $29,500 in research & development costs and is expected to be produced over the next three years.
Direct costs of producing the transformers are $35,000 per run of 5,000 transformers each.
Indirect manufacturing costs charged to each run are $40,000.
Destination charges for each transformer average $1.50.
Customer service expenses average $0.30 per transformer.
The transformers are selling for $26.50 the first year and will increase progressively by $3.5 and $4.00 in the second and third years, respectively.
Sales units equal production units each year.
14) What are estimated life-cycle revenues?
A) $250,000
B) $280,000
C) $905,000
D) $840,000
E) $835,000
Show your calculations
15) What is the estimated life-cycle operating income for the first year?
A) $18,000
B) $20,000
C) $47,500
D) $37,500
Show your calculations
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