Question
Please show in excel the calculations and thank you in advance :) TOTAL COST OF OWNERSHIP PERSONAL COMPUTERS Supply Manager Patric Mittlestadt was considering the
Please show in excel the calculations and thank you in advance :)
TOTAL COST OF OWNERSHIP PERSONAL COMPUTERS
Supply Manager Patric Mittlestadt was considering the purchase of 1,000 desktop PCs for his organization. The life cycle was 3 years and the organizations cost of capital was 12 percent. He calculated the Total Cost of Ownership for one of the purchase options as follows. (Note: FTE stands for a full time equivalent employee, PO stands for Purchase order.)
Cost elements Cost Measures
Purchase Price:
- Equipment Supplier quote: $1,200 per PC
- Software License A Supplier quote: $300 per PC
- Software License B Supplier quote: $100 per PC
- Software License C Supplier quote: $50 per PC
Acquisition Cost:
- Sourcing 2 FTE @ 85K and $170k for 2 months
- Administration 1 PO @ 150, 12 invoices @ $40 each
Usage Costs:
- Installation $700 per PC (PC move, install, network)
- Equipment Support $120 per month per PC ---- Supplier quote
- Network Support $100 per month ------- supplier quote
- Warranty $120 per PC for a 3-year warranty
- Opportunity Cost Lost Productivity Downtime 15 hours per PC per year @ $30 per hour
End of Life
- Salvage Value $36 per PC
Assignment
- Determine the total cost (TCO) of this contract over three years with total cost for each year and present value.
- How would you approach this supplier about reducing the total cost of ownership for computers over the life of this contract?(negotiation strategy)
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