P25-34 Making sell or process further
decisions
P25-34 This problem continues the Davis Consulting, Inc. situation from
Problem P24-37 of Chapter 24. Davis Consulting provides consulting services at
an average price of $175 per hour and incurs variable costs of $100 per hour.
Assume average fixed costs are $5,250 a month.
Davis has developed new software that will revolutionize billing for
companies.
Davis has already invested $200,000 in the software. It can market the
software as is at $30,000 per client and expects to sell to eight clients.
Davis can develop the software further, adding integration to Microsoft
products at an additional development cost of $120,000. The additional
development will allow Davis to sell the software for $38,000 each, but to 20
clients. Should Davis sell the software as is or develop it further?
TUTORIAL
PREVIEW
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Sell software as is
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Process software further
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Revenue
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$240,000
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(a)
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$760,000
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(b)
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File name: P25-34 Davis Consulting.xls
File type: .xls PRICE: $5
