Purchase Solution

# Lifecycle cost calculation and analysis

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Life Cycle Costing looks at not only the purchase price of an acquisition but also the operating, maintenance, training costs, warranty provisions and other elements which either increase or decrease the anticipated life time cost of a product. Life cycle cost can be an important factor in the final selection of a product. Refer to CPRG Vol 1 Chapters 5.6 and 5.7 as you complete this exercise. Download the word document, and complete. Then use your completed sheet to answer the questions which follow related to this exercise. You will not be submitting the word document, it is for your reference as you answer the questions about the assignment. This exercise is not timed but multiple attempts to complete the exercise are not permitted and you must submit by the due date to receive credit. There are 13 questions in total and the assignment is worth 50 points. Use the attached file for this exercise

Life Cycle Costing looks at not only the purchase price of an acquisition but also the operating, maintenance, training costs, warranty provisions and other elements which either increase or decrease the anticipated life time cost of a product. Life cycle cost can be an important factor in the final selection of a product.
Given the information in the attached chart, conduct an analysis of the three vendors offering a 50 gallon water heater addressing the four areas below. If this spurs interest in water heater efficiency, there actually is a government website where you can calculate the cost of electric and gas heaters http://energy.gov/eere/femp/energy-cost-calculator-electric-and-gas-water-heaters-0

1. Conduct a life cycle price analysis price to determine the purchase, maintenance and operating cost for the 10 year life cycle. You may find it helpful to develop a chart and enter cost for these three aspects for each year.
2. Next consider the other aspects of the systems which are presented and frame a discussion on what would influence you personally in your purchasing decision beyond mere price. Which would you select and why?

3. Finally, consider the following scenarios and determine which system each buyer would likely select and why
a. Family of 10

b. Couple living in Leadville, Colorado at 10,152 ft. above sea level

c. System to be used in Honolulu Hawaii

characteristics Water Wonder Hydro Gennie Aqua Buddy

Energy Star Compliant

Yes and qualifies for 30% federal rebate on purchase price

Energy star
No

Amperage (amps)

22
18.8
18.8

Fuel Type

Electric heat pump system

Electric
Gas

Labor Warranty

1 year
None
2 year

Part Warranty

3 year
6 year
8 year
Life Expectancy 10 years 10 years 10 years
Annual Maintenance Cost \$125 \$125 \$125

Operational range

40-120 degrees
60-140 degrees
60-160 degrees
Tank type Stainless steel Non-metallic tank and jacket resists corrosion Steel

Self Cleaning

Yes
No
yes
Other Easy to use LED touch pad

First 3 years of annual maintenance included Factory-installed temperature and pressure relief valve

Rated up to 10,200 feet
Cost info Hybrid saves estimated 18% in operating cost over gas system
Annual operating cost \$515 Gas saves \$5 per year over electric
Price \$1,500 \$1,100 \$1,300

##### Solution Summary

The calculation of lifecycle costs for three different water heater types and recommendation based on cost and other parameters.

##### Solution Preview

Attached

LIFECYCLE PRICE ANALYSIS
Water Wonder Hydro Gennie Aqua Buddy
Purchase Price \$1,500 \$1,100 \$1,300
Maintenance Cost Price/year Total cost Price/year Total cost Price/year Total cost
\$125 \$1,250 \$125 \$1,250 \$125 \$1,250
Operating Cost Price/year Total cost Price/year Total cost Price/year Total cost
\$418.2 \$4,182 \$515 \$5,150 \$510 \$5,100
Benefits Federal Rebate Cost Saved Free Maintenance Cost Saved
30% on purchase price \$450 3 years \$1,545
Total Lifecycle Cost \$6,482 \$5,955 \$7,650

Analysis
Lifecycle price analysis of three water heaters indicates that Hydro Gennie offers lowest lifecycle cost while Aqua Buddy has highest ...

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