ITPEC FE Subject A April 2026 Question 52

Purchasing samples and modifying them in-house, at 340,000 dollars — the cheapest of the four.

Person-month cost is the head count times the length of that process times its rate: creation 6 months at 6,000, modification 3 months at 10,000, evaluation 2 months at 10,000.

• •(a) 200,000 + (4 × 3 × 10,000) + (1 × 2 × 10,000) = 200,000 + 120,000 + 20,000 = 340,000
• •(b) outsourcing only, with no internal staff = 350,000
• •(c) (10 × 3 × 10,000) + (3 × 2 × 10,000) = 300,000 + 60,000 = 360,000
• •(d) (10 × 6 × 6,000) + (2 × 2 × 10,000) = 360,000 + 40,000 = 400,000

Answer (a)

Why not others: each is simply dearer — (b) by 10,000, (c) by 20,000 and (d) by 60,000. Option (d) looks attractive because creation is billed at the lowest rate of 6,000, but it also runs for six months with ten people, which outweighs the cheaper rate.

Key rule: Multiply head count by that process's own duration, not by a single project length — the three processes have different lengths and different rates, which is where the arithmetic usually goes wrong.

AI-generated — may contain errors