Harry and Sally Are Starting a New Business Venture and Are

question 115

Essay

Harry and Sally 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 $8,000 in setup costs.
-The lamp product line incurred $40,000 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 $300.
-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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Definitions:

Task Performance

The execution and completion of specific duties or responsibilities associated with one's role or job.

Goal-Directed Activities

Actions deliberately undertaken to achieve specific outcomes or objectives.

Organizational Citizenship Behaviors

Actions by employees that are beyond their formal job requirements but significantly contribute to the positive functioning of the organization.

Conscientiousness

One of the five major personality traits, indicating a person's tendency to be organized, responsible, and hardworking.