Question

Newton, Rivera and Associates are in the process of evaluating its new client services for the business consulting division.

∙	Estate Planning, a new service, incurred $50,000 in development start-up costs and employee training.

∙	The direct costs of providing this service, which is all labor, averages $27 per hour.

∙	Other costs for this service are estimated at $300,000 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 $95 per job, with each of the estimated 100 jobs 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 $42 per hour.

Ignoring the time value of money, what is estimated life-cycle operating income for the first year?

Group of answer choices

A. $240,500

B. $1,320,500

C. 250,000

D. $1,330,000

Answer 1

Correct Option is A , $240500

The Life Cycle Cost is the total throughout the cost of Product/ Service  including Planing ,Desining , Reseach , Product cost , Labour Etc

Calculating total Life Cycle cost and Operating income of Service with life Life of 2 year

		Year 1	Year 2
Life Cucle Revenue		$1680000	$1680000
Planninng , Developtment , Staff Training	$50000	$50000	-
Direct Cost (Labour)	$27*40000	$1080000	$1080000
Custermer service Expense	100Jobs *$95	$9500	$9500
Other Cost of Service	$300000/ year	$300000	$300000
Cost of 1st Year		$240500	$290500