Answer the Following Questions Using the Information Below

question 93

Multiple Choice

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

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Definitions:

Agent

A person or entity authorized to act on behalf of another, typically in business or legal matters, and make decisions or take action.

Reimburse

To pay back or compensate for money spent or losses incurred.

Cooperate

The act of working together willingly toward a common goal or purpose, especially in a business or legal context.

Compensate

To provide something, typically money, in recognition of loss, suffering, or injury incurred; recompensation.