Bicker,Inc

question 98

Essay

Bicker,Inc. ,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 setup 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 5,000 transformers each.
∙ 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.
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:

Operant Conditioning

A learning process through which the strength of a behavior is modified by reinforcement or punishment.

Phobic Responses

Exaggerated fears triggered by specific objects, situations, or activities, resulting in intense anxiety or avoidance behaviors.

Mowrer

Psychologist O.H. Mowrer, known for his theories on learning and contributions to behavior therapy, especially in the treatment of fears and enuresis.

Obsessive-Compulsive Disorder

A mental disorder characterized by persistent, unwanted thoughts (obsessions) and repetitive behaviors (compulsions).