How many months will you need to use the solution to pay for the internal solution in comparison to the vendor’s solution?

You are the project manager for your organization. You have identified a risk event that your organization could manage internally or externally. If you manage the event internally it will cost your project $578,000 and an additional $12,000 per month the solution is in use. A vendor can manage the risk event for you. The vendor will charge $550,000 and $14,500 per month that the solution is in use. How many months will you need to use the solution to pay for the internal solution in comparison to the vendor’s solution?

A.
Approximately 15 months

B.
Approximately 8 months

C.
Approximately 11 months

D.
Approximately 13 months

Explanation:

To find the best decision you will first find the difference of the out-of-pocket expenses. In this example, it is $28,000. You will divide this value by the difference of the monthly support fee, which is $2,500. The result is 11.2 months. In other words, if you will be keeping the solution longer than 11 months it is more cost effective to build the solution. If you will be using the solution less than 11 months hire the vendor. Answer option B is incorrect. 8 months is not a valid calculation. Answer option D is incorrect. 13 months is not a valid calculation. Answer option A is incorrect. 15 months is not a valid calculation. Reference: "Project Management Body of Knowledge (PMBOK Guide), Fourth Edition"