- This topic has 3 replies, 2 voices, and was last updated 3 years ago by
.
- Posts
“However, if the annual operating costs are considered, assuming the initial IT investment costs will be amortised, decision package 2 will bring annual savings of $34,750 (The difference between decision package 1 $171, 750 and decision package 2 $137, 000).’
I assume that you are happy with the calculations showing the cost of package 1 as being 216,750 and that of package 2 being 235,500, and so package 2 being more expensive by the difference of $18,750.
However both of those calculations include the full initial costs of the equipment.
If you remove these costs of 45,000 for package 1 and 98,500 for package 2, then the total costs change to $171,750 and $137,000. This makes package 2 cheaper by $34,750.
so when it is amortised it may or may not be a relevant cost in the decision package?
Amortising is simply depreciating. If the depreciation is included then in total it will be equal to the total initial cost.
A question is likely to specify whether or not to include. If it does not specify, as in this question, then it is something to discuss in the answer.
- You must be logged in to reply to this topic.