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

1. Determine the total cost (TCO) of this contract over three years with total cost for each year and present value.
2. How would you approach this supplier about reducing the total cost of ownership for computers over the life of this contract?(negotiation strategy)