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