Exam CBAP topic 1 question 55 discussion

need to find the common variable used in make or buy which is here number of months. Alt (make) the Break point = 61000 + 7990 * N where N number of months Alt (buy) the Break point = 78000 + 8765 * N where N number of months at break point value the two alternarives are equal 61000 + 7990 * N = 78000 + 8765 * N N=21.935

there is an error in the numbers: the cost (or support) should be switched to break even at 22 months. Otherwise, they would never ever break even: the first solution is more expensive both in cost and support.

We divide the difference in upfront costs ($17,000) by the monthly savings ($775) to find out how many months it will take to "break even". Think of it like this: - The difference in upfront costs ($17,000) is like a "debt" that the "do it yourself" option needs to pay off. - The monthly savings ($775) is like a monthly "payment" that the "do it yourself" option makes towards paying off that "debt". By dividing the "debt" ($17,000) by the monthly "payment" ($775), we get the number of months it will take to pay off the "debt" and break even. Make sense?

Let's break it down in simple terms: Imagine you have two options to get something done: Option 1: Do it yourself ( internal solution ) Option 2: Hire someone else to do it ( vendor's solution ) The cost of doing it yourself is $78,000 upfront, and then you'll pay $8,765 every month to maintain it. The cost of hiring someone else is $61,000 upfront, and then you'll pay $7,990 every month to maintain it. The question is: how long will it take for the "do it yourself" option to be cheaper than hiring someone else? To find the answer, we calculate the difference in upfront costs ($78,000 - $61,000 = $17,000) and the difference in monthly costs ($8,765 - $7,990 = $775). Then, we divide the difference in upfront costs ($17,000) by the monthly savings ($775), which gives us approximately 22 months. So, it will take about 22 months for the "do it yourself" option to be cheaper than hiring someone else.

21.93, closest answer is 22months. Option D

The internal solution will never break even because its costs will always be higher than the vendor's cost. The vendor's cost are always beneficial as its fixed as well as variable costs are lower compared to internal solution's cost. As the time passes, the internal solution tends to cost more compared to internal solution. This is also justified by negative N value resulted from solving the equation: $78,000 + $8,765*N = $61,000 + $7,990*N

It is true that the values for the monthly costs are reversed. Like this, the number of months would be negative since the two functions would never meet, as Olivier said

Buy: $86765 Make: $68990 Implementation cost difference: $17775 Monthly cost difference: $775 Implementation cost difference: $17775/Monthly cost difference: $775 =22.93 months to break even. Nearest answer D

out of scope of BABOK v3

makavely007 answer is correct, only if we reverse the monthly cost. Without that, there is no chance that second solution will break first one

This is a tricky question. I think the way it is written throws me off, but ultimately I see that the "break even" is referring to how much time will it take to offset the extra expenses that would have been saved up front. E.g., if the company had chosen the vendor's solution, they would have immediately realized and equivalent of 22 months of savings vs. the internal solution.

Monthly extra cost for in-house solution=$8765-$7990=$775 Extra cost expended in a year for in-house solution against vendor solution=$78000-$61000=$17000 How many months would it take to cover extra yearly cost at $775 monthly=$17000/$775=21.935 or 22months

me too

I would like to find out the formula that got us 22 month