Exam CBAP topic 1 question 137 discussion

Actual exam question from IIBA's CBAP

Question #: 137
Topic #: 1

You are the business analyst for your organization and are trying to determine the best solution for an identified problem. You have determined that you could create a software solution using inhouse resources for $65,000 and with an ongoing support of $5,600 per month. A vendor offers you a quote that they can create the software for $49,000 with an ongoing support of $6,100 per month.
Which solution should you choose?

A. Create the software if you'll keep the solution less than 32 months.
B. Create the software if you'll use the solution longer than 32 months.
C. There is not enough information to determine which solution is financially better.
D. Buy from the vendor if you'll keep the solution longer than 32 months.

Show Suggested Answer

Suggested Answer: B 🗳️

by Ray81 at March 12, 2021, 10:33 a.m.

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MylesD

2 months ago

65000 + (5600*N) = 49000 + (6100*N), 65000-49000 = 6100N-5600N, 16000=500N, N = 32 Option B is correct as you should use the solution longer than the pay back period.

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Ray81

1 year, 10 months ago

Can someone please explain how they got this answer?

upvoted 1 times

Qualms

1 year, 9 months ago

First, you have to calculate the time (N) at which the total cost of ownership for both solution approaches will be equal, 65000 + (5600*N) = 49000 + (6100*N), 65000-49000 = 6100N-5600N, 16000=500N, N = 32. Because the maintenance cost for create is $5600 and the maintenance cost for purchase is $6100, then it means that after 32months, we will incur less maintenance cost on the create option. Hence, Option B is correct.

upvoted 17 times

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Exam CBAP topic 1 question 137 discussion

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MylesD

Ray81

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