Question
Washta Software develops and markets computer software for the agriculture industry. Because support costs are a larger portion of the cost of the software development,
Washta Software develops and markets computer software for the agriculture industry. Because support costs are a larger portion of the cost of the software development, the director of cost operations of Washta, Vera Soren, is especially concerned with understanding the effects of support cost behaviour. Soren has completed a preliminary activity analysis of one of Washta's primary software products: FertiMix (software to manage fertilizer mixing). This product is a software template that is customised for specific customers, who are charged for the basic product plus customising costs. The activity analysis is based on the number of customised lines of FertiMix code. Currently, support cost estimates are based on a fixed rate of 65% of the basic cost. Data are shown for two recent customers: Customer Mystical Plants Total Blooms Basic cost of FertiMix $ 8,000 $ 8,000 Lines of customised codes $ 520 $ 160 Estimated cost per line of customised code $ 20 $ 20
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