You are the business analyst for your organization. You're considering if you should make a solution or purchase it from a vendor. If your team creates the solution, it will cost $286,000 and will cost $2,400 per month to support. The vendor's solution, however, will cost $239,000 and will cost $2,850 per month to support. How long will you need to use your in-house solution to be more cost effective than the vendor's proposed solution?
- 105 months
- 32 months
- 64 months
- 19 months
Answer(s): A
Explanation:
In 105 months, your solution will equate to the cost savings offered by the vendor. In other words, if your solution will be kept longer than
105 months, it's best to use your solution. You can find this solution by first finding the difference of the build and buy costs, which is $47,000. Next, find the difference of the monthly costs, which is only $450. You'll then divide $47,000 by $450 for an answer of 104.4 months, or for this answer, 105 months.
Answer C is incorrect. 64 months is not the correct calculation to this scenario. Answer B is incorrect. 32 months is not the correct calculation to this scenario. Answer D is incorrect. 19 months is not the correct calculation to this scenario.