Arizona Communications contracted to set up a call center for the City of Phoenix. Under the terms of the contract, Arizona Communications will design and set-up a call center with the following costs:

Design of call center	$10,000
Computers, servers, telephone equipment	$275,000
Software	$85,000
Installation and testing of equipment	$15,000
Selling commission	$25,000
Annual service contract	$50,000

In addition, Arizona Communications will maintain and service the equipment and software to ensure smooth operations of the call center for an annual fee of $90,000. Ownership of equipment installed remains with the City of Phoenix. The contract costs that should be capitalized is

		$460,000
		$410,000
		$360,000
		$370,000