Henderson Company is in the process of evaluating a new part using the following information .•Part SLC2002 has one production run each month, each with $16,000 in setup costs. •Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years. •Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each. •Indirect manufacturing costs charged to each run are $88,000. •Destination charges for each run average $18,000. •Part SLC2002 is selling for $12.50 in the United States and $25 in all other countries. Sales are one-third domestic and two-thirds exported. •Sales units equal production units each year. Required: a.What are the estimated life-cycle revenues? b.What is the estimated life-cycle operating income for the first year?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Henderson Company is in the process of evaluating a new part using the following information
.•Part SLC2002 has one production run each month, each with $16,000 in setup costs.
•Part SLC2002 incurred $40,000 in development costs and is expected to be produced over the next three years.
•Direct costs of producing Part SLC2002 are $56,000 per run of 24,000 parts each.
•Indirect
•Destination charges for each run average $18,000.
•Part SLC2002 is selling for $12.50 in the United States and $25 in all other countries. Sales are one-third domestic and two-thirds exported.
•Sales units equal production units each year.
Required:
a.What are the estimated life-cycle revenues?
b.What is the estimated life-cycle operating income for the first year?
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