Stone and Bicker Are Starting a New Business Venture and Are

question 95

Essay

Stone and Bicker 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 $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:
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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Definitions:

Wilcoxon Signed Rank Test

A statistical analysis method void of parametric requirements, designed to assess whether two associated samples, matched pairs, or recurrent measurements on an individual sample exhibit differences in their mean rank in the population.

Rank Sums

A non-parametric statistical measure used to compare the distributions of two independent samples by ranking all observations together and then summing ranks for observations belonging to each sample.

Standardized Test Statistic

A calculated value used to determine the relative distance of a data point or sample from the mean of a population, expressed in terms of the standard deviation of the population.

Positive Differences

The result obtained when subtracting a smaller number from a larger number in each pair of a data set.