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Mathematics & Economics
Math Problem
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Research and Describe The Total Cost of Ownership (TOC) (Math Problem Sample)


The production manager has asked you to purchase a replacement numerically controlled (NC) plasma-cutting machine for the metal fabrication shop. She has provided you with the manufacturer’s number and model number for two models and indicates that the performance of either machine is perfectly acceptable. The existing tooling and fixtures will also work with either machine. Footprint and utility requirements are nearly the same as the old machine and will not require changes to the facility. The equipment will be depreciated over a ten-year period, which is also the expected service life. An annual service contract is required after the expiration of the warranty and throughout the remaining service life. You will take advantage of a 2% discount offered by each supplier for paying cash. You decide to complete a total cost of ownership (TCO) analysis to help make the purchasing decision.


Total Cost of Ownership (TOC)
Besides the initial purchase price, there are other costs over the lifecycle of the asset or machinery, and when the asset can be resold there is a residual value at the end of the life (Monczka, Handfield, Giunipero & Patterson, 2016). The Total Cost of ownership (TCO) is the initial transaction cost, acquisition costs, and usage cost and the residual value and if resold salvage cost. I would recommend the Cuts All Model 10 model, since the total cost of ownership is $45,255 and lower than that of Super-Hot Model Z2 at $51,162.

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