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Farley Chemist - upgrade of computer system
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Option A In-house modification |
Programmers (5 x €50,000) |
250,000 |
|
relevant cost |
Technicians rise |
4,000 |
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€44,000 sunk cost |
New technician |
36,000 |
|
relevant cost |
VHI (on new staff only - 6 x €640) |
3,840 |
|
existing staff VHI is sunk cost |
HR charge |
0 |
|
sunk cost |
Computers (3 x €1,000) |
3,000 |
|
€900 x 2 is sunk cost |
Printer |
600 |
|
relevant cost |
Communications |
1,850 |
|
relevant cost |
Desks |
0 |
|
sunk cost |
Chairs (6 x €150) |
900 |
|
relevant cost |
Technicians tools |
180 |
|
relevant cost |
Consumables |
500 |
|
relevant cost |
Admin. director |
0 |
|
sunk cost |
Incremental cost of Option B |
|
|
|
|
|
|
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Option B Sub-contract |
Contract fee |
300,000 |
|
relevant cost |
New employee |
56,000 |
|
relevant cost |
VHI |
640 |
|
relevant cost |
HR charge |
0 |
|
sunk cost |
Computer |
0 |
|
sunk cost |
Printer |
600 |
|
relevant cost |
Desk |
0 |
|
sunk cost |
Chair |
150 |
|
relevant cost |
Modems and coms equipment |
3,400 |
|
relevant cost |
Admin. director |
0 |
|
sunk cost |
Incremental cost of Option B |
|
|
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I would advice Farley to adopt Option A from a financial viewpoint it incurs the lowest incremental cost.
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