Reference no: EM131806925
Question - Moore Development Company developed the following budgeted life-cycle income statement for two proposed products. Each product's life cycle is expected to be two years. A 12 percent return on sales is required for new products. Because the proposed products did not have a 12 percent return, the product were not going to be produced.
Product A Product B Total
Sales $ 400,000 $350,000 $750,000
Cost of goods sold 300,000 200,000 500,000
Gross profit $ 100,000 $ 150,000 $ 250,000
Period expenses:
Research and Development (100,000)
Marketing (75,000)
Life-cycle income $750,000
Product A requires more research and development costs but fewer resources to market than Product B. Sixty-five percent of the research and development costs are traceable to Product A, and 40 percent of the marketing costs are traceable to Product A.
What would be the life-cycle income for Product A if research and development costs and marketing costs are traced to each product?