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A buyer for a frozen yogurt franchise with 1 4 5 stores is responsible for all the asset purchases at her company. She has decided
A buyer for a frozen yogurt franchise with stores is responsible for all the asset
purchases at her company. She has decided to upgrade the equipment of her outlets by
installing new cash registers. She believes that if she purchases these latest cash regis
ters, they will last for the next eight years. She is considering a quote from a supplier
who agreed to supply the cash registers for $ per register. The buyer wants to order
one register for each store registers Along with the registers, she also decided to
buy two addons for each register a credit card machine and an automatic coin dis
penser. The two accessories would cost her an additional $ and $ per register.
As with any purchase of new equipment, support would be required to maintain the
equipment. The buyer decided to purchase an eightyear warranty, which would cost $
per register. She also estimated that she will need to spend money to link the registers to
the computer system, which would cost $ per quarter per register and an additional
$ every six months per register for maintenance. The buyer will need to pay a onetime
upfront training charge of $ per register to train the outlet managers. She also consid
ered the cost of downtime every year when the registers are not working and another
form of cashing people out must be used She estimated the downtime to be hours
per register per year, and the cost to be $ per hour. She was confident that the highend
registers would have a salvage value of $ per register at the end of their life.
As she was calculating the cost, she suddenly realized that there were other costs
related to the purchase. The cost to install the registers was $ per register. She cal
culated that finalizing the sourcing contract for the registers, security service, and other
costs would take the work of fulltime equivalent people working in the purchasing
department exactly days of each person's time. She thought that she would need the
help of a sourcing manager who makes a total salary of $ per year and an assis
tant who earns $ per year. They would place an initial purchase order, which
would cost the company $ and each year they would submit invoices at an estimate
of $ each for the register service costs.
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