You are the project manager for your organization. You have identified a risk event you're 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?

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D. Approximately 11 months The break-even point is found by setting the two cost functions equal: 578,000 + 12,000x = 550,000 + 14,500x. Subtracting 550,000 and 12,000x from both sides gives 28,000 = 2,500x, so x = 11.2 months, which rounds to approximately 11 months. Before 11 months the vendor is cheaper; after 11 months the internal solution becomes more cost-effective.

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A. Approximately 8 months 8 months is too low; at 8 months internal cost is $674,000 vs vendor $666,000, which is not the break-even point.

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B. Approximately 15 months 15 months significantly overshoots the break-even; the equations balance at 11.2 months, not 15.

Answer

C. Approximately 13 months 13 months is also past the break-even threshold and does not satisfy the equation 578,000 + 12,000(13) = 734,000 vs 550,000 + 14,500(13) = 738,500, which are not equal.

You are the project manager for your organization. You have identified a risk event you're your organization could manage internally or externally. If you manage the event internally it will cost…

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