Question

8-3 Identifying relevant information (LO 1)

Jason McGregor manages an IT department for a large corporation. Kelly Preston, vice president for marketing, has asked him to help her evaluate two statistical packages for monitoring customer purchases. Stat-Max costs $912,000, requires 2 gigabytes of disk storage space and 80 programmer hours for customization, and has no annual license fee. The software vendor provides 150 hours of user training and offers 24-hour support. Buy Tracker costs $500,000, requires 2 gigabytes of disk storage space and 125 programmer hours for customization, and carries a $10,000 annual license fee. The software vendor provides 150 hours of user training and offers support from 8:00 a.m. to 5:00 p.m. Central Standard Time.

a. What information is relevant to the decision to purchase one of these statistical packages?

b. What other information would you want to know?

c. Will the out-of-pocket cost of the software be more or less than the relevant cost? What causes the difference?

Answer 1