Riceville Software develops and markets computer software for the agriculture industry. Because support costs are a large portion of the cost of software development, the director of cost operations of

Riceville, Uma Hilshire, is especially concerned with understanding the effects of support cost behavior. Hilshire

has completed a preliminary activity analysis of one of Riceville's primary software products: FertiMix (software to manage fertilizer mixing). This product is a software template that is customized for specific customers, who are charged for the basic product plus customizing costs. The activity analysis is based on the number of customized lines of FertiMix code. Currently, support cost estimates are based on a fixed rate of 50% of the basic cost. Data are shown for two recent customers:

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Data table

	Customer
	Sunshine Plants	Today Blooms
Basic cost of FertiMix	$12,000		$12,000
Lines of customized code	450		160
Estimated cost per line of customized code	$22		$22

Requirements

1.	Compute the support cost of customizing FertiMix for each customer using each cost-estimating approach.
2.	If the activity analysis is reliable, what are the pros and cons of adopting it for all Riceville's software products?

Question content area bottom

Part 1

Requirement 1. Compute the support cost of customizing FertiMix for each customer using each cost-estimating approach.

	Support Costs Allocated
Cost driver	Sunshine Plants	Today Blooms
Percent of basic cost
Lines of customized code