Question: NewApp Software Production is deciding whether to take on a new, large client, for whom additional hires will need to be made and another workspace

NewApp Software Production is deciding whether to take on a new, large client, for whom additional hires will need to be made and another workspace will need to be rented. Estimates of the rents and facilities costs per year are $550,000, and the new developers the company must hire cost $75,000 per year, including benefits. One new developer must be hired for each app produced per year. The company estimates that five developers will need to be hired based on initial estimates of the scope of work, which entails five completed apps currently priced at $150,000 each.

a) What is the minimum total value of the contract that NewApp must secure in order to break even? Use the algebraic approach.

b) How should NewApp price each completed app to ensure a total contribution of $1 million?

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