Answer the following questions using the information below:
Snowy River Transformers is in the process of evaluating a new product using the following information:
∙ A new transformer has two production runs each year,each with $10 000 in set-up costs.
∙ The new transformer incurred $30 000 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 5000 transformers.
∙ Indirect manufacturing costs charged to each run are $45 000.
∙ Destination charges for each transformer average $1.00.
∙ Customer service expenses average $0.20 per transformer.
∙ The transformers are selling for $25 the first year and will increase by $3 each year thereafter.
∙ Sales units equal production units each year.
-What is the estimated life-cycle operating profit for the first year?
A)$18 000
B)$48 000
C)$20 000
D)$119 000

Question

Quizplus · Accepted Answer

The estimated life-cycle operating profit for the first year is $18,000. This is calculated by subtracting the total costs of production from the total revenue generated in the first year. The total costs of production include the direct costs, indirect costs, destination charges, and customer service expenses. The total revenue generated is calculated by multiplying the selling price per transformer by the number of transformers sold.

Answer the Following Questions Using the Information Below