Question : Answer the following questions using the information below: Purple Purpose Inc., : 1211812

 

Answer the following questions using the information below:

 

Purple Purpose 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 4,500 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.

 

7) What are estimated life-cycle revenues?

A) $225,000

B) $477,000

C) $729,000

D) $756,000

 

8) What is the estimated life-cycle operating income for the first year?

A) ($5,800)

B) (2,600)

C) 2,600

D) 5,800

9) What is the estimated life-cycle operating income for the first three years?

A) $63,600

B) $96,600

C) $123,600

D) $150,600

 

Answer the following questions using the information below:

 

Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division.

•Estate Planning, a new service, incurred $100,000 in development costs and employee training.

•The direct costs of providing this service, which is all labor, averages $27 per hour.

•Other costs for this service are estimated at $400,000 per year.

•The current program for estate planning is expected to last for two years. At that time, a new law will be in place that will require new operating guidelines for the tax consulting.

•Customer service expenses average $95 per client, with each job lasting an average of 400 hours. The current staff expects to bill 40,000 hours for each of the two years the program is in effect. Billing averages $42 per hour.             

 

10) What are estimated life-cycle revenues?

A) $1,680,000

B) $90,500

C) $3,360,000

D) $181,000

11) What is estimated life-cycle operating income for the first year?

A) $190,500

B) $81,000

C) $90,500

D) $181,000

 

12) What is the estimated life-cycle operating income for the first two years?

A) $3,360,000

B) $281,000

C) $190,500

D) $90,500

 

Answer the following questions using the information below:

 

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division.

•Server Planning, a new service, incurred $250,000 in development costs.

•The direct costs of providing the service, which is all labor, averages $50 per hour.

•Other costs for this service are estimated at $300,000 per year.

•The current program for server planning is expected to last for two years. At that time, expected new operating systems are likely to make the service non viable.

•Customer service expenses average $250 per client, with each job lasting an average of 40 hours. The current staff expects to bill 15,000 hours for each of the two years the program is in effect. Billing averages $90 per hour.

 

13) What are the estimated life-cycle revenues?

A) $2,700,000

B) $3,000,000

C) $3,400,000

D) $1,350,000

14) What is the estimated life-cycle operating income for the first year?

A) $206,250

B) $162,500

C) $(43,750)

D) $43,750

 

15) A life-cycle budget is usually prepared to budget for costs and production for a period of one year.

 

16) Customer life-cycle costs focus on the total costs incurred by a customer to acquire, use, maintain, and dispose of a product or service.