Justin and Lisa are starting a new business venture and are in the process of evaluating their
Question:
Justin and Lisa are starting a new business venture and are in the process of evaluating their product lines. Information for one new product, hand-made lava lamps, is as follows:
Every six months a new lamp pattern will be put into production. Each new pattern will require $11,200 in setup costs.
The lamp product line incurred $48,000 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 labour-hours and 2 machine-hours.
Indirect manufacturing costs are estimated at $160,000 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 $224.
Sales units equal production units each year.
Required
What are the estimated life-cycle revenues?
What is the estimated life-cycle operating income if the product life cycle is one year?
Expert Answer:
To calculate the estimated lifecycle revenues we need to know the total number of units that will be ... View the full answer
