Jamal Kareem Rashid and Associates are in the process of evaluating its new

Jamal kareem rashid and associates are in the process

This preview shows page 46 - 49 out of 60 pages.

11) Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division. Estate Planning, a new service, incurred $180,000 in development costs and employee training. The direct costs of providing this service, which is all labor, averages $30 per hour. Other costs for this service are estimated at $450,000 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 $104 per client, with each job lasting an average of 500 hours. The current staff expects to bill 50,000 hours for each of the two years the program is in effect. Billing averages $46 per hour. What is estimated life-cycle operating income for the first year? 1. A) $339,600 2. B) $149,200 3. C) $159,600
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4. D) $319,200 Answer: C Explanation: Revenue (50,000 x $46) 2,300,000 Development cost 180,000 Direct costs (50,000 x $30) 1,500,000 Indirect costs 450,000 Customer service ($104 x (50,000./500)) 10,400 2,140,400 Operating income / loss $159,600 Diff: 3 Objective: 6 AACSB: Application of knowledge 12) Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division. Estate Planning, a new service, incurred $190,000 in development costs and employee training. The direct costs of providing this service, which is all labor, averages $29 per hour. Other costs for this service are estimated at $410,000 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 $104 per client, with each job lasting an average of 450 hours. The current staff expects to bill 67,500 hours for each of the two years the program is in effect. Billing averages $49 per hour. What is the estimated life-cycle operating income for the first two years? Diff: 3 Objective: 6 AACSB: Application of knowledge 13) Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division. Server Planning, a new service, incurred $330,000 in development costs. The direct costs of providing the service, which is all labor, averages $40 per hour. Other costs for this service are estimated at $340,000 per year. The current program for server planning is expected to last for two years. At that time, expected new operating systems are likely to make the service non viable. Customer service expenses average $350 per client, with each job lasting an average of 40 hours. The current staff expects to bill 15,000 hours for each of the two years the program is in effect. Billing averages $100 per hour. What are the estimated life-cycle revenues?
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Diff: 1 Objective: 6 AACSB: Analytical thinking
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