Paul and Lucy are starting a new business venture and are in the process of evaluating their product lines.

Information for one new product, hand-made lamps, is as follows:

Every six months a new lamp pattern will be put into production. Each new pattern will require $11,000 in setup costs.

The lamp product line incurred $30,000 in development costs and is expected to be produced over the next six years.

Direct costs of producing the lamps average $144 each. Each lamp requires 12 labor-hours and 2 machine-hours.

Indirect manufacturing costs are estimated at $168,000 per year.

Customer service expenses average $16 per lamp.

Current sales are expected to be 2,000 units of each lamp pattern. Each lamp sells for $250.

Sales units equal production units each year.

Required:

a. What are the estimated life-cycle revenues?

b. What is the estimated life-cycle operating income for the first year?