Use the information below to answer the following question(s).N-C 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 which 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 N-C Associates' life-cycle budgeted revenue?

Question

Quizplus · Accepted Answer

To calculate the budgeted revenue, we need to add up the revenue generated by each element of the service:

1. Development Costs and Employee Training: $600,000
2. Direct Costs (Labor): $100/hour * 40,000 hours/year * 2 years = $8,000,000
3. Other Costs: $2,000,000/year * 2 years = $4,000,000
4. Customer Service Expenses: $400/client * 40,000 clients/year * 2 years = $32,000,000
5. Billing: $140/hour * 40,000 hours/year * 2 years = $11,200,000

Total budgeted revenue: $600,000 + $8,000,000 + $4,000,000 + $32,000,000 + $11,200,000 = $55,800,000

Therefore, the correct answer is C) $11,200,000.

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