Expo Manufacturing Inc

Multiple Choice

Expo Manufacturing Inc., is in the process of evaluating a new product using the following information:
-A new transformer has three production runs each year, each with $15,000 in setup costs.
-The new transformer incurred $45,000 in development costs and is expected to be produced over the next three years.
-Direct costs of producing the transformers are $55,000 per run of 5000 transformers each.
-Indirect manufacturing costs charged to each run are $45,000.
-Destination charges for each transformer average $2.00.
-Customer service expenses average $0.40 per transformer.
-The transformers are selling for $20 the first year and will increase by $4 each year thereafter.
-Sales units equal production units each year.
What is the estimated life-cycle operating income for the first year?

A) (126,000)
B) 1,146,000
C) 1,596,000
D) 126,000