From the article: Total Cost of Ownership (TCO)
Product “A” costs $50 to purchase, but it needs to be serviced every year at a cost of $2 each time. It has no resale value, but can be sold for scrap at the end of its 12 year life span for $2. Product “B” costs $60. It costs $4 to service it, but only needs to be serviced every 5 years. It lasts for 15 years, but has no re-sale value. So which is cheaper?
Which Would You Buy?
TCO Choice
- Product B because initial cost plus two service calls, at 5 & 10 years, totals $68 but product A calls for annual service calls [11] less scrap of $2 for TCO of $70. In addition, B causes less down time for servicing.
- —Guest safetyjack
TCO
- I'll buy prduct 'B' because it does need servicing after every week and have 15 years life so,that would be more useful for me...
- —Guest Rabia
Good question
- The TCO after each products lifespan is about equal unless you assume that items A and B need no service at the end of their expected lifespan which would then put the TCO at $70 for A and $68 for B. Then we look at the respective life spans: Item A lasts 12 years and B lasts 15. This widens the gap in actual TCO considerably- $5.83 per year for A and $4.53 per year for B. Finally there is the cost of expected downtime for each item. Since that was not defined, we assume that they are equal and then count the number of times each must be serviced. A needs about 10 - 12 service times over 12 years and B needs 2 - 3 service times over 15 years. B is clearly cheaper than A in TCO.
- —Guest Karl Chicago
Product B
- It's the same cost for each, but the additional work in calling for product A to be serviced will translate into man power hours $. Buy product B.
- —Guest lvern
B is 20% cheaper
- A would cost $68 (because you would only need maintenance 10 times - subtract the first and last year of ownership), then subtract $2 for scrap. B would cost $68, because you would need maintenance twice, at 5 years and 10 years, not at 15. Yearly cost of A is $5.67 ($68/12 years). Yearly cost of B is $4.53 ($68/15 years). B is clearly cheaper. Also, labor costs for your employee to schedule and verify yearly maintenance is higher than every 5 years.
- —Guest Amy R.
product B
- Product B last longer for less cost - only needs maintenance twice
- —Guest janet
P L ?
- The cost is the same for either one. Both end up costing $72 overall.
- —Guest sumillr
Total Cost of Ownership
- Product B is the way to go. This is because product B has a greater usage lifespan. The aggregate total cost for all the products is $72 at the end of their life cycles. Product A after 12 years will be sold for $2 but the total cost of maintenance will be total $24 that add $50 dollars initial outlay will add up to $74 then subtracting the $2 scrap value will give $72 dollars at the end of 12 years which will transcend to $6 a year while as product B will transcend to $4,80 dollars a year
- —Guest cliffordwz@yahoo.com
