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Knowledge Transfer Associates is in the process of evaluating its new client services for the...

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Accounting

Knowledge Transfer Associates is in the process of evaluating its new client services for the business systems consulting division.

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ServerPlanning, a newservice, incurred$270,000 in development costs.

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The direct costs of providing theservice, which is alllabor, averages$40 per hour.

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Other costs for this service are estimated at$310,000 per year.

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The current program for server planning is expected to last for two years. At thattime, expected new operating systems are likely to make the service non viable.

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Customer service expenses average$300 perclient, with each job lasting an average of 60 hours. The current staff expects to bill22,800 hours for each of the two years the program is in effect. Billing averages$100 per hour.

What is the estimatedlife-cycle operating income for both yearscombined?

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