David is software engineer. He uses writing software code in maintaining the security of credit card information. David is approached by the ECG company. They offer to pay him $100,000 for the right to use his code under license in their e. Procurement software package. David rejects this offer because it provides him with no additional benefits if the e. Procurement package is a runaway success. Both parties eventually agree to a contract in which ECG pays David a flat fee of $100,000 for the right to use his code in up to 10,000 packages. If e. Procurement sells more than 10,000 packages, Wang receives $8 for each package sold beyond the 10,000 level.

1. What is the unit cost of ECG for David's software code included in its e. procurement package if it sells (a) 2,000, (b) 6,000, (c)10,000, and (d) 20,000 packages? Comment on the results.

2. For prediction of ECG's total cost of David's software codeine. procurement,

which unit cost (if any) of (a) to (d) in requirement 1 would you recommend

ECG use?