The Company 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 5,000 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?
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