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Ninja Toys makes toys to sell to the kids age between 3 to 9 years....

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Accounting

Ninja Toys makes toys to sell to the kids age between 3 to 9 years. It has made a new product, the water gun. The CEO, Kimmi Ninja, is in the process of evaluating the new product using the following information:

A new water gun has two production runs a year, each with $10 000 in set-up costs.

The new water gun incurred $30 000 in development costs and is expected to be produced over the next three years.

Direct costs of producing the water gun are $40 000 per run of 5000 water gun, so total 10000 units per year.

Indirect manufacturing costs charged to each run are $45 000.

Destination charges for each water gun average $1.

Customer service expenses average $0.20 per water gun.

The water guns are selling for $25 the first year, which will increase by $3 each year thereafter.

Sales units equal production units each year.

What are the estimated life-cycle revenues?

a.$250 000

b.$840 000

c.$280 000

d.$560 000

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