December
1999 QUESTION 5 Total Marks: 15 Marks |
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| (a) |
Infosoft is a software development corporation that is involved in many diverse projects.It decides to use the top-down or parametric approach to do cost estimation for a contract for which it would like to bid. After a complete investigation,it discovers that,to complete the project successfully, it will need to employ 32 people at $40/hour for a total of 40 weeks.Each employee works for 48 hours per week.There is a fixed cost of $6,000 per employee to cover computing costs,plus fringe benefits costs of 10%of wage costs per employee.The company wishes to make a profit of 12.5%on the contract. How much should it bid for the contract,and how much profit will it make?
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[7] |
| (b) |
Tradewell is an exporting company that wants to change to an automated environment;the Infosoft Corporation is bidding for the contract.Tradewell Company has offered two contracts,(A)and (B). A For contract (A),it has agreed to pay all of the costs of the project plus a fee of $350,000. B For contract (B),it has agreed to pay $4,000,000 for the entire project. Based on past experience,Infosoft has determined that there is a 50% chance that it can complete the entire project for $3.4 million and a 50% chance that it will cost $3.8 million. (i)What kind of contract is contract (A)?[1 mark ] (ii)What kind of contract is contract (B)?[1 mark ] (iii)Give a detailed explanation as to which contract is most profitable.[3 marks ] (iv)Discuss the benefi.ts and weaknesses of both contracts.[3 marks ] |
[8] |