Natasha Gurdin is debating which of two models of a car to buy ( A or B ), being

Question

Natasha Gurdin is debating which of two models of a car to buy ( A or B ), being indifferent with regard to their technical Performance. She has been told that the average monthly cost of owning Model A, based on LCC analysis, is $500
a) Using the following Data for Model B, Calculate its LCC and determine which model is best choice for Natasha

purchase Price $23000
Life Expectancy 4 years
Release VAlue $13000
Maintenance $1100 per year
Operational Cost $90 per month
car Insurance $1400 per year
MEan Time between Failures 14 months
Repair Cost per failure $650

b) Develop a general Model that can be used to calculate LCC for a Car.

Explanation / Answer

average monthly cost of owning Model A, based on LCC analysis, is $500
if its life is taken to b 4 yrs then cost will b = $500(4)(12)
a) Using the following Data for Model B, Calculate its LCC and determine which model is best choice for Natasha

purchase Price $23000
Life Expectancy 4 years
Release VAlue $13000
Maintenance $1100 per year
Operational Cost $90 per month
car Insurance $1400 per year
MEan Time between Failures 14 months
Repair Cost per failure $650

total cost throughout life for b=$23000+$13000+ $1100 (4)+$90 (12)(4)+ $1400 (4)+ $650(3)

average monthly cost for model b =($23000+$13000+ $1100 (4)+$90 (12)(4)+ $1400 (4)+ $650(3))/(12*4)
so natasha should select that model which has less average cost per month

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