Franklin Company is in the process of evaluating a new part using the following information.
∙ Part SLC2002 has one production run each month, each with $18,000 in setup costs.
∙ Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
∙ Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
∙ Indirect manufacturing costs charged to each run are $88,000.
∙ Destination charges for each run average $15,000.
∙ Part SLC2002 is selling for $14.00 in the United States and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
∙ 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? |
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