Question - The Myles Time Corporation is starting up a new division and is evaluating its product lines. Information for one new product, working stopwatches, is as follows:
Four times each year (once a quarter), a new stopwatch model will be put into production. Each new model will require $1,150 in setup costs.
The working stopwatches product line incurred $43,859 in development costs and is expected to be produced over the next three years.
Direct costs of producing the models average $1.25 each.
Indirect manufacturing costs are estimated at $82,000 per year.
Customer service expenses average $0.05 per watch.
Current sales are expected to be 3,700 units of each model. Each watch sells for $9.95.
Sales units equal production units each year.
What is the estimated life-cycle operating income for the first year?