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 $50,000 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 5700 transformers each.
-Indirect manufacturing costs charged to each run are $115,000.
-Destination charges for each transformer average $2.00.
-Customer service expenses average $0.70 per transformer.
-The transformers are selling for $35 the first year and will increase by $2 each year thereafter.
-Sales units equal production units each year.
What is the estimated life-cycle operating income for the first three years?

A) $556,170
B) $2,221,170
C) $179,590
D) $2,196,970