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:

Materials Price Variance

The difference between the actual cost of materials used in production and the budgeted or standard cost, indicating how effectively a company controls its material costs.

Standard Costs

Predetermined costs for materials, labor, and overhead that are used for budgeting and cost control purposes.

Raw Materials

The unprocessed natural materials or substances used in the initial stages of production or manufacturing.

Cost System

A method used to allocate costs to products, services, projects, or departments to facilitate financial analysis, budgeting, and managerial decision-making.