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Ackworth Software develops and markets computer software for the agriculture industry. Because support costs are a large portion of the cost of software development. the
Ackworth 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 Ackworth, Tricia O'Conner, is especially concerned with understanding th effects of support cost behavior. O'Conner has completed a preliminary activity analysis of one of Ackworth's primary software products: FertiMix (software to manage fertilizer mixing). This product is a software template that is customized for specic 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 xed rate of 45% of the basic cost. Data are shown for two recent customers: a (Click the icon to view the data.) 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 Ackworth's software products? Requirement 1. Compute the support cost of customizing FertiMix for each customer using each cost-estimating approach. Support Costs Allocated Cost driver Garden Plants Judy Blooms Percent of basic cost :: Lines of customized code :: Data table Customer Garden Plants Judy Blooms Basic cost of FertiMix $ 13,000 $ 13,000 Lines of customized code 420 90 Estimated cost per line of customized code $ 19 $ 19
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