Question
Ninja Toys makes toys to sell to the kids age between 3 to 9 years. It has made a new product, the water gun. The
Ninja Toys makes toys to sell to the kids age between 3 to 9 years. It has made a new product, the water gun. The CEO, Kimmi Ninja, is in the process of evaluating the new product using the following information:
A new water gun has two production runs a year, each with $10 000 in set-up costs.
The new water gun incurred $30 000 in development costs and is expected to be produced over the next three years.
Direct costs of producing the water gun are $40 000 per run of 5000 water gun, so total 10000 units per year.
Indirect manufacturing costs charged to each run are $45 000.
Destination charges for each water gun average $1.
Customer service expenses average $0.20 per water gun.
The water guns are selling for $25 the first year, which will increase by $3 each year thereafter.
Sales units equal production units each year.
What are the estimated life-cycle revenues?
a.$250 000
b.$840 000
c.$280 000
d.$560 000
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