# What is the annual operating income from deluxe if

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Chapter 8 / Exercise 25
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
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Question 2: What is the annual operating income from Deluxe if theprice is reduced to \$4,000 and sales in units increase by 25%?
3. (TCO 7)Dulce Greeting Cards Incorporated is starting a new business venture and is in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: ∙ For 16 times each year, a new card design will be put into production. Each new design will require \$300 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. …………… (Points: 25)3. (TCO 7) Grace 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.
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Chapter 8 / Exercise 25
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
∙ 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. What is the estimated life-cycle operating income for the first year?Grace Greeting Cards Incorporated Production40,000 cardsSales (40,000 x\$ 3.5)\$140,000 Less: Variable Costs:Direct Manufacturing\$20,000 Marketing\$4,000 \$24,000CM\$116,000 Less: Fixed CostsSetup Costs\$9,600 Development Costs\$18,750 Indirect Manufacturing Costs\$50,000 \$78,350Operating Income\$37,650 What are the estimated life-cycle revenues?workingsTotal No of Cards Sold16 design X 2,500 cards X 4 Years160,000 cards(\$)(\$)Total Estimated Lifecycle 160,000 cards X 560,000
Sales\$3.50Less : Total Lifecycle CostDevelopment Cost(75,000)Setup Cost16 Design X \$600X 4 Years(38,400)Direct Production Cost\$0.50 X 160,000 cards(80,000)Indirect Manufacturing Cost\$50,000 X 4 Years(200,000)Customer Service Expense\$0.10 X 160,000 cards(16,000)Total Estimated Lifecycle Cost(409,400)Estimated life-cycle Profit150,6004. (TCO 8)Novacar Company manufactures automobiles. The red car division sells its red cars for \$25,000 each to the general public. The red carshave manufacturing costs of \$12,500 each for variable and \$5,000 each for fixed costs. The division's total fixed manufacturing costs are \$25,000,000 at the normal volume of 5,000 units. ……………………………. (Points: 25)