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

Design of call center	$18000
Computers, servers, telephone equipment	$510000
Software	$150000
Installation and testing of equipment	$26000
Selling commission	$46000
Annual service contract	$80000

In addition, Sandhill Communications will maintain and service the equipment and software to ensure smooth operations of the call center for an annual fee of $160000. Ownership of equipment installed remains with the City of Phoenix. The contract costs that should be capitalized is

$678000.

$830000.

$660000.

$750000.