mation for one new product , traditional parchment grade cards , is as f ollows :
∙ Sixteen times each year , a new card design will be put into produ ction . Each new design will require $ 600 in setup costs .
∙ The parchment grade card product line incurred $ 75,000 in devel opment 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 . What is the estimated life-cycle operating income for the first year ? What are the estimated life-cycle revenues ? workings 4 . ( TCO 8 ) Novacar Company manufactures automobiles . The red car division sells its red cars for $ 25,000 each to the general public . The r ed cars have manufacturing costs of $ 12,500 each for variable and $ 5 , 000 each for fixed costs . The division ' s total fixed manufacturing cost s are $ 25,000,000 at the normal volume of 5,000 units . ……………… ……………. ( Points : 25 ) 4 . Colorfull Autocar Company manufactures automobiles . The Red C ar Division sells its red cars for $ 25,000 each to the general public . Th e red cars have manufacturing costs of $ 12,500 each for variable and $ 5,000 each for fixed costs . The division ' s total fixed manufacturing c osts are $ 25,000,000 at the normal volume of 5,000 units . The Blue Car Division has been unable to meet the demand for its car s this year . It has offered to buy 1,000 cars from the Red Car Division at the full cost of $ 17,500 . The Red Car Division has excess capacity and the 1,000 units can be produced without interfering with the curre nt outside sales of 5,000 . The 6,000 volume is within the division ' s rel evant operating range . Explain whether the Red Car Division should a ccept the offer . Support your decision showing all calculations 4 . ( TCO 8 ) Sportswear Company manufactures socks . The Athletic Di vision sells its socks for $ 6 a pair to outsiders . Socks have manufactur ing costs of $ 2.50 each for variable and $ 1.50 for fixed . The division ' s