CS 4447 Homework 6
(Due: at 11:59PM on
9/22/2019)
Based on the topics we have learned in this module, please read
following mini case and answer the questions. For this
hw assignment, you need to prepare word or pdf
document.
Mini Case: Campus Bikes
In Chapter 6 (Please see hw 5 description), you
learned that Campus Bikes is a popular bicycle shop located near a
major university. The shop sells several brands of new bikes,
including everything from high-end racing models to beach cruisers.
In addition to sales of new bikes and accessories, Mark’s service
department is always busy. The staff includes Mark himself, a
bookkeeper, two part-time sales reps, a full-time mechanic, and
several part-time service helpers who assemble bikes.
Background
Until now, the owner, Mark Turner, kept the business records on his
personal computer. He cre- ated a simple database to keep track of
inventory, but it is not always up-to-date. He also developed
spreadsheets to track expenses and payroll. The business has grown
and Mark wants to install a new computer system to handle all
business functions.
You are a lab assistant in the computer information department at
the college. You earned
a computer science degree at a two-year school, and you recently
decided to work toward your four-year degree. Mark recently asked
you to help him plan a system for Campus Bikes. You used an
object-oriented approach to create a model of the business
functions and actors involved.
Now Mark wants you to do a “make or buy” analysis. Specifically,
you will look into the pros and cons of in-house development versus
purchase of a software package. Your research indicates that the
most popular bike shop package is offered by a vendor called
BikeData.
In your last meeting, Mark said that tangible savings for a new
system would be hard to measure, but improved customer care, better
service department records, and increased productivity are
expected. Mark estimates that these benefits will add up to about
$3,000 per year, whether the system is developed in-house, or
purchased from BikeData.
You decide to compare relative costs to establish a total cost of
ownership (TOC) over the use- ful life of the system. Based on your
research, you put together the following summary:
Costs for Option A: Develop In-house
The system will have a six-year useful life, be very
flexible, and easiest to maintain.
It will cost $15,000 to develop, install, and
configure the system, and $1,000 to load existing
data.
Mark and the bookkeeper can handle day-to-day support
with no added expense.
Costs for Option B: Purchase BikeData Software Package
This is a vertical package with a four-year useful
life.
The software is less flexible than an in-house system
and some customizing will be needed.
It will cost $8,000 to purchase, $1,500 to install and
configure, $2,500 to load existing data, and $1,000 additional
hardware will be needed
Support is free for the first year, then there is a
$2,000 annual fee
Benefits for Both Options: $3,000 per year
Tasks
1.(20 pts) Calculate ROI for both options.
2.(20 pts) Calculate NPV for both options. Use an 8% discount
factor.
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