Henderson Company Is in the Process of Evaluating a New

Essay

Henderson Company is in the process of evaluating a new part using the following information.
• Part SLC2002 has one production run each month,each with $16,000 in setup costs.
• Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
• Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
• Indirect manufacturing costs charged to each run are $88,000.
• Destination charges for each run average $18,000.
• Part SLC2002 is selling for $12.50 in the United States and $25 in all other countries.Sales are one-third domestic and two-thirds exported.
• 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 for the first year?