Author Question: Expo Manufacturing Inc., is in the process of evaluating a new product using the following ... (Read 77 times)

lbcchick · **on:** Mar 6, 2021

Expo Manufacturing Inc., is in the process of evaluating a new product using the following information:
∙ A new transformer has three production runs each year, each with $15,000 in setup costs.
∙ The new transformer incurred $50,000 in development costs and is expected to be produced over the next three years.
∙ Direct costs of producing the transformers are $40,000 per run of 5700 transformers each.
∙ Indirect manufacturing costs charged to each run are $115,000.
∙ Destination charges for each transformer average $2.00.
∙ Customer service expenses average $0.70 per transformer.
∙ The transformers are selling for $35 the first year and will increase by $2 each year thereafter.
∙ Sales units equal production units each year.

What is the estimated life-cycle operating income for the first three years?
◦ $556,170
◦ $2,221,170
◦ $179,590
◦ $2,196,970

Tonyam972 · **Reply #1 on:** Mar 6, 2021

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