Henderson Company Is in the Process of Evaluating a New

question 105

Essay

Henderson Company is in the process of evaluating a new part using the following information.
∙ Part SLC2002 has one production run each month,each with $16,000 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 $18,000.
∙ Part SLC2002 is selling for $12.50 in the Canada 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 if the product life cycle is one year?

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