Happyland Construction
Happyland Construction
Maulik Patel
Maulik.patel@westburne.ca
Module – 2
Happyland Construction Inc. is an engineering firm involved in design and construction of oil shale plants. It is building a plant in Blissful Valley, which is part of Mirth County, in the Province of Giggle. Happyland is a world leader in designing shale oil plants and has about 100 employees working on site. Happyland has been advised that a new crane has to be used on the site – the GargantuLift 6000 by Mega Corporation. It has been recommended by a team of crane operators, finance staff, purchasing and site management.
So at this time Happyland has two options either Buy it or Rent it. To take this decision company need two report which will reflect total cost of Ownership for both option.
To create both reports we have to consist of three costs categories – pre-transaction, transaction and post-transaction.
Pre-transaction costs are all the costs that occur prior to the good or service being delivered. Typical costs components in the pre-transaction phase
Transaction costs are the costs that occur after supplier selection and up to the point the product or service is delivered to the organization.
Post-transaction cost analysis is often the most significant contribution that the total cost of ownership approach adds to procurement decision making
Make Analysis:-
Pre Transaction Cost: - There are $500,000 as Pre transaction. This cost includes prior research working with mine production staff and engineering, Total time spend finding alternate supplies.
Transaction Cost: - There are $11,150,000 as Transaction cost which include Purchase cost of 11,000,000 and Travel and Related Costs in Assessing Cranes and Making Recommendation: $150,000.
Post-transaction Cost: - There are different amount of Post transaction cost for Product in 10 years of lifetime.
Year 1 - $370,000 (Initial Training for 2 Crane Operators: $20,000, Yearly Maintenance: $50,000, Annual Operating Costs
Maulik Patel
Maulik.patel@westburne.ca
Module – 2
Happyland Construction Inc. is an engineering firm involved in design and construction of oil shale plants. It is building a plant in Blissful Valley, which is part of Mirth County, in the Province of Giggle. Happyland is a world leader in designing shale oil plants and has about 100 employees working on site. Happyland has been advised that a new crane has to be used on the site – the GargantuLift 6000 by Mega Corporation. It has been recommended by a team of crane operators, finance staff, purchasing and site management.
So at this time Happyland has two options either Buy it or Rent it. To take this decision company need two report which will reflect total cost of Ownership for both option.
To create both reports we have to consist of three costs categories – pre-transaction, transaction and post-transaction.
Pre-transaction costs are all the costs that occur prior to the good or service being delivered. Typical costs components in the pre-transaction phase
Transaction costs are the costs that occur after supplier selection and up to the point the product or service is delivered to the organization.
Post-transaction cost analysis is often the most significant contribution that the total cost of ownership approach adds to procurement decision making
Make Analysis:-
Pre Transaction Cost: - There are $500,000 as Pre transaction. This cost includes prior research working with mine production staff and engineering, Total time spend finding alternate supplies.
Transaction Cost: - There are $11,150,000 as Transaction cost which include Purchase cost of 11,000,000 and Travel and Related Costs in Assessing Cranes and Making Recommendation: $150,000.
Post-transaction Cost: - There are different amount of Post transaction cost for Product in 10 years of lifetime.
Year 1 - $370,000 (Initial Training for 2 Crane Operators: $20,000, Yearly Maintenance: $50,000, Annual Operating Costs