Question

Last year, your company purchased a site license to the accounting software suite FUN for $10,000. Yesterday, your IT department discovered that the software erroneously calculates 2+2=5 and suggested purchasing a replacement software for $15,000. How should your company assess or quantify the cost of the decision to replace its software? The replacement software includes a monthly fee of $100 per site license (i.e., the fee to the company is $100 per month regardless of the number of computers on which the software is installed or how often it is used); how would the company characterize this cost (in terms of the concepts we've discussed this week)?

Answer 1

Assessment and Justifiation of cost of decision to replace:

We have just purchase the accounting software yesterday and today we got to know that it has a majour problem with respect to addition of 2+2. this should be consider as a vital risk as the calculation will always reflect wrong output that too in financial matter.

we can reachout to the vendor and ask them to lookinto it. but since we have already purchased this there is no way of getting the money back.

Assuming the after salses servise of the software conmany is also not sufficient to meet the requirement we have to take a corrective action for long term view of our company. Correct financial records and data is very essential for financial decision making. consedering this we need to opt for buying the new software, so that we will be able to take the financial decision in a more appropriate way.

The cost of 100 which is incrred on recurring basis can be caractrised as monthly expense for running and maintainance of the software.