Answer the Following Questions Using the Information Below

question 82

Multiple Choice

Answer the following questions using the information below:
Waugh,Chapple,Border and Associates is in the process of evaluating its new client services for the business consulting division.
∙ Estate planning,a new service,incurred $600 000 in development costs and employee training.
∙ The direct costs of providing this service,which is all labour,averages $100 per hour.
∙ Other costs for this service are estimated at $2 000 000 per year.
∙ The current program for estate planning is expected to last for two years.At that time,a new law will be in place that will require new operating guidelines for the tax consulting.
∙ Customer service expenses average $400 per client,with each job lasting an average of 400 hours.The current staff expects to bill 40 000 hours for each of the two years the program is in effect.Billing averages $140 per hour.
-What is the estimated life-cycle operating profit for the first two years?

• A)$(1 480 000)
• B)$11 200 000
• C)$(1 400 000)
• D)$3 200 000

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Definitions:

Opening Inventory

The value of a company's inventory at the beginning of an accounting period, which is carried over from the end of the previous period.

Tax Effect

The impact of tax laws and regulations on an individual's or company's financial decisions and situations, including the calculation of tax liabilities.

Carrying Amount

The value at which an asset is recognized in the balance sheet after accounting for depreciation, amortization, and impairment losses.

Periodic Method

An accounting method where inventory and cost of goods sold (COGS) are determined at the end of an accounting period, as opposed to continuously tracking these figures.