Acct434 Advanced Cost Management: 3. (TCO 7) Grace Greeting Cards Incorporated is starting

Acct434 Advanced Cost Management
3. (TCO 7) Grace 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 $200 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.
- Indirect manufacturing costs are estimated at $50,000 per year.
- Customer service expenses average $0.10 per card.
- 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 total estimated life-cycle operating income? (Points : 25)
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