Question

please complete P25-33 and all requirements in excel. thanks!

P25-33 Making sell or process further decisions This problem continues the Daniels Consulting situation from Problem P24-37 of Chapter 24. Daniels Consulting provides consulting services at an average pride of $150 per hour and incurs variable costs of $75 per hour. Assume average fixed costs are $5,250 a month. Daniels has developed new software that will revolutionize billing for companies. Daniels has already invested $300,000 in the software. It can market the software as is at $40,000 per client and expects to sell to 12 clients. Daniels can develop the software further, adding integration to Microsoft products at an additional development cost of $150,000. The additional development will allow Daniels to sell the software for $49,000 each but to 16 clients. Should Daniels sell the software as is or develop it further?

Answer 1

As Is Develop further Expected clients A 12 16 Software price B $ 40,000 $ 49,000 Expected Revenue C = AXB $ 480,000 $ 784,000 Invested in Software D $ 300,000 $ 300,000 Additional Development Cost E $ $ 150,000 Margin F=C-D-E $ 180,000 $ 334,000 When Danieal sells software as is, he will get Margin of $ 180,000 only but if he sell software after development, he will get Margin of $ 334,000. By developing software further with additional cost of $ 150,000, Daniel will earn $ 154,000 ($ 334,000 - $ 180,000 ) more margin. So, Daniel should sell the software after develop it further.