Acc206 Principles of Accounting: P20-34 Draper Consulting provides consulting service

Acc206 Principles of Accounting

P20-34 Make, sell as is or process further decisions [20-25min]
This problem continues the Draper Consulting, Inc., situation from Problem 19-33 of Chapter 19.

Draper Consulting provides consulting service 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.

Draper has developed new software that will revolutionize billing for companies. Draper has already invested $200,000 in the software. It can market the software as is at $30,000 a client and expects to sell to eight clients. Draper can develop the software further, adding integration to Microsoft products at an additional development cost of $120,000. The additional development will allow Draper to sell the software for $38,000 each, but to 20 clients.

1. Should Draper sell the software as is or develop it further?
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