Question 4.4 Celebration Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: Sixteen times each year, a new card design will be put into production. Each new design will require $600 in setup costs. The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over the next four years. Direct costs of producing the designs average $0.50 each. Indirect manufacturing costs are estimated at $50,000 per year. Customer service expenses average $0.10 per card. Current sales are expected to be 2,500 units of each card design. Each card sells for $3.50. Sales units equal production units each year. Required What are the estimated life-cycle revenues? What is the estimated life-cycle operating income if the product life cycle is one year? What is the estimated life-cycle operating income per year for the years after the first year if all of the development costs are charged to the first year? What is the total estimated life-cycle operating income?
Question 4.4 Celebration Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: Sixteen times each year, a new card design will be put into production. Each new design will require $600 in setup costs. The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over the next four years. Direct costs of producing the designs average $0.50 each. Indirect manufacturing costs are estimated at $50,000 per year. Customer service expenses average $0.10 per card. Current sales are expected to be 2,500 units of each card design. Each card sells for $3.50. Sales units equal production units each year. Required What are the estimated life-cycle revenues? What is the estimated life-cycle operating income if the product life cycle is one year? What is the estimated life-cycle operating income per year for the years after the first year if all of the development costs are charged to the first year? What is the total estimated life-cycle operating income?
Chapter4: Preparing And Using Financial Statements
Section: Chapter Questions
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Question 4.4
Celebration Greeting Cards Incorporated is starting a new business venture and are in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows:
- Sixteen times each year, a new card design will be put into production. Each new design will require $600 in setup costs.
- The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over the next four years.
- Direct costs of producing the designs average $0.50 each.
- Indirect
manufacturing costs are estimated at $50,000 per year. - Customer service expenses average $0.10 per card.
- Current sales are expected to be 2,500 units of each card design. Each card sells for $3.50.
- Sales units equal production units each year.
Required
- What are the estimated life-cycle revenues?
- What is the estimated life-cycle operating income if the product life cycle is one year?
- What is the estimated life-cycle operating income per year for the years after the first year if all of the development costs are charged to the first year?
- What is the total estimated life-cycle operating income?
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