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Hi Dear tutor, I have a question.
NUCLEAR STATION
Operating cost 486*40=19440
DC————————–12000
total life cycle cost–31440Dear tutor what is the difference between total life cycle cost and operating cost?
Wind station, operating cost given and we find sales revenue and deduct total life cycle cost of 55000 and then we multiplu 1750*20 years and find total profit my question here if operating cost does not form total life cycle cost how we can get total life cycle cost in Nuclear station by multiplyin above example?
As I explain in my free lectures, the life-cycle cost includes all costs.
In this question, for the nuclear station, there are operating costs (running costs) of $486M a year for 40 years – so a total of $19,440M – and also decommissioning costs of $12,000. The answer has correct taken both costs into account.
For the wind station, the question tells you what the life-cycle cost is and this obviously includes the operating cost.
Total life cycle cost=include also operating costs and others and if this is in the case why we took just operating cost in wind station and found sales revenue and deducted total life cycle cost to find profit.we should take total life cycle cost and find sales revenue based on it not based on operating cost
But the answer does not just take the operating cost for the wind station!!!!!
It takes the life-cycle cost which already includes the operating cost.
The lifecycle profit is the revenue less the lifecycle costs.
Dear tutor, I would like to say that why we take opersting cost to find sales revenue 40000×100/60=66667?I took 55000×100/60=91667 then deducted again 55000 from 91667 to find profit 36667 ×36000(1750×20)=1283345000 why not this way? if 55000 included 40000?
It would help if you were to say which part of the question you were referring to!!
I am now guessing that you are referring to Q19. If so then the question speaks of the operating margin. and the operating margin is, as always, the profit by reference to the operating costs. That is the definition of operating margin (as you should remember from Paper MA (was F2) ) and has itself nothing to do with lifecycle costing !!
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