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:

Countervailing Power

A concept where power in a market or industry is distributed in such a way that no single entity can dominate decisions or outcomes, effectively balancing the power dynamics.

Dominant Party

A political term that describes a party which holds a majority of legislative seats or otherwise exercises a disproportionate amount of power within a political system.

Exchange Relationship

A relationship between individuals or entities based on reciprocal exchanges of benefits or resources, often analyzed within the context of organizational behavior.

Interdependence

A situation or condition where individuals or groups are mutually reliant on each other to achieve goals or complete tasks.