Analyzing Cost and Benefit: Campus Bikes

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Problem:
Until now, the owner of Campus Bikes shop, Ali, kept the business records on his personal computer.
He created a simple database to keep track of inventory, but it is not always up-to-date. He also developed spreadsheets to track expenses and payroll. The business has grown and Ali wants to install a new computer system to handle all business functions. Ali asked you, a consultant, to do a “make or buy” analysis. Specifically, you will look into in-house development versus purchase of a software package. Your research indicates that the most popular bike shop package is offered by a vendor called BikeData. In your last meeting, Ali said that tangible savings for a new system would be hard to measure, but improved customer care, better service department records, and increased productivity are expected. Ali estimates that these benefits will add up to about AED 6,000 per year, whether the system is developed in-house, or purchased from BikeData. You decide to compare relative costs to establish a total cost of ownership (TOC) over the useful life of the system. Based on your research, you put together the following summary:

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