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    Total Cost of Ownership

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    Kashém
    The document compares the costs of renting vs purchasing software and hardware over a three year period for a company called Dirt Bikes. Renting the software and hardware would cost $209,500 total over three years, while purchasing would cost $318,999.50. Therefore, renting is identified as the lower-price alternative that meets Dirt Bikes' requirements based solely on cost savings. However, purchasing allows for customization and upgrades that could provide long-term benefits to the company. Other factors to consider beyond cost include differences in quality and lifespan of the rented versus purchased options.

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    Total Cost of Ownership

    Uploaded by

    Kashém
    70 views2 pages
    The document compares the costs of renting vs purchasing software and hardware over a three year period for a company called Dirt Bikes. Renting the software and hardware would cost $209,500 total over three years, while purchasing would cost $318,999.50. Therefore, renting is identified as the lower-price alternative that meets Dirt Bikes' requirements based solely on cost savings. However, purchasing allows for customization and upgrades that could provide long-term benefits to the company. Other factors to consider beyond cost include differences in quality and lifespan of the rented versus purchased options.

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    The document compares the costs of renting vs purchasing software and hardware over a three year period for a company called Dirt Bikes. Renting the software and hardware would cost $209,500 total over three years, while purchasing would cost $318,999.50. Therefore, renting is identified as the lower-price alternative that meets Dirt Bikes' requirements based solely on cost savings. However, purchasing allows for customization and upgrades that could provide long-term benefits to the company. Other factors to consider beyond cost include differences in quality and lifespan of the rented versus purchased options.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    70 views2 pages

    Total Cost of Ownership

    Uploaded by

    Kashém
    The document compares the costs of renting vs purchasing software and hardware over a three year period for a company called Dirt Bikes. Renting the software and hardware would cost $209,500 total over three years, while purchasing would cost $318,999.50. Therefore, renting is identified as the lower-price alternative that meets Dirt Bikes' requirements based solely on cost savings. However, purchasing allows for customization and upgrades that could provide long-term benefits to the company. Other factors to consider beyond cost include differences in quality and lifespan of the rented versus purchased options.

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    1. Identify the lowest-price alternative that meets Dirt Bikes’s requirements.

    Year 1 Year 2 Year 3


    Expense (Buying)
    Numer of Users 25 25 25
    Software License Fees $ 100,000.00
    software upgrades $ 5,000.00 $ 5,000.00 $ 5,000.00
    Customization cost $ 20,000.00 $ - $ -
    Hadware Installation $ 4,000.00 $ - $ -
    User Training Support $ 10,000.00 $ - $ -
    Technical Support $ 55,000.00 $ 56,650.00 $ 58,349.50
    Annual Totals $ 194,000.00 $ 61,650.00 $ 63,349.50
    Total for 3 years $ 318,999.50

    Expenses (Renting)
    Number of users 25 25 25
    Software rental fee (Per user) $ 62,500.00 $ 62,500.00 $ 62,500.00
    Customization cost $ 12,000.00 $ - $ -
    User training cost $ 10,000.00 $ - $ -
    Annual cost $ 84,500.00 $ 62,500.00 $ 62,500.00
    Total for 3 years $ 209,500.00

    The total cost of renting this software over a three-year period is $209,500, the total cost

    of purchasing this software over a three-year period is $318,999.50. The lowest-price

    alternative meets Dirt Bikes’s requirements will be renting the software. Renting would be

    the better option here for the company to save money. However though buying the licensing

    fee allows you to be able to upgrade and customize the software yourself and in the long run

    could be better for the company.


    2. What other factors should Dirt Bikes consider besides cost in determining whether to rent or

    buy the hardware and software?

    Besides cost in determining whether to rent or buy the hardware and software, we should also

    consider the quality difference between the hardware and software, the lasting time of the

    hardware and software.

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