P25-34 This problem continues the Davis Consulting, Inc. situation from Problem P24-37 of Chapter 24. Davis Consulting

QUESTION

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?

ANSWER:

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