This problem continues the Davis Consulting, Inc. situation from Problem P24-37

of Chapter 24. Davis Consulting provides consulting services at an average price

of $175 per hour and incurs variable costs of $100 per hour. Assume average fixed

costs are $5,250 a month.

Davis has developed new software that will revolutionize billing for companies.

Davis has already invested $200,000 in the software. It can market the software as

is at $30,000 per client and expects to sell to eight clients. Davis can develop the

software further, adding integration to Microsoft products at an additional development

cost of $120,000. The additional development will allow Davis to sell the

software for $38,000 each, but to 20 clients.

Should Davis sell the software as is or develop it further?