Axcel Software Began a New Development Project in 2012

question 118

Multiple Choice

Axcel Software began a new development project in 2012. The project reached technological feasibility on June 30, 2013, and was available for release to customers at the beginning of 2014. Development costs incurred prior to June 30, 2013, were $3,200,000 and costs incurred from June 30 to the product release date were $1,400,000. The 2014 revenues from the sale of the new software were $4,000,000, and the company anticipates additional revenues of $6,000,000. The economic life of the software is estimated at four years. 2014 amortization of the software development costs would be:

• A)$0.
• B)$350,000.
• C)$1,840,000.
• D)$560,000.

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Definitions:

Contribution Format

An income statement format that separates fixed and variable costs, highlighting the contribution margin of a company's products or services.

Segmented Statements

Financial reports that break down the revenue, costs, and profitability of different parts of a company, such as departments or product lines.

Variable Costing

Variable costing is a costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Net Operating Income

The income generated from normal business operations, excluding expenses such as interest and taxes.