A firm has a computer, which it uses for a variety of purposes. One of the major costs associated with the computer is software development. The vice president for information systems wants to evaluate whether it is less costly to have his own programming staff or to have programs developed by a software development firm. The costs of both options are a function of the number of lines code (program statements) the vice president estimates that in-house development costs $1.50 per line of code. In addition, annual overhead costs for supporting the programmers equal $30,000. Software developed outside the firm costs, on average, $2.25 per line of code. (a) How many lines of code per year make costs of the two options equal? (b) If programming needs are estimated at 30,000 lines per year, what are costs of the two options? (c) In part (b) what would the in-house cost per line of code have to equal for the two options to be equally cost?

A firm has a computer, which it uses for a variety of purposes. One of the major costs associated with the computer is software development. The vice president for information systems wants to evaluate whether it is less costly to have his own programming staff or to have programs developed by a software development firm. The costs of both options are a function of the number of lines code (program statements) the vice president estimates that in-house development costs $1.50 per line of code. In addition, annual overhead costs for supporting the programmers equal $30,000. Software developed outside the firm costs, on average, $2.25 per line of code.
(a) How many lines of code per year make costs of the two options equal?
(b) If programming needs are estimated at 30,000 lines per year, what are costs of the two options?
(c) In part (b) what would the in-house cost per line of code have to equal for the two options to be equally cost?

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