Week 5: Fiscal Management (Part II) - Case Study Case Study #2 (150 pts) All cas
ID: 442239 • Letter: W
Question
Week 5: Fiscal Management (Part II) - Case Study
Case Study #2 (150 pts)
All case studies are to be completed as individual projects. This means it must be your own, ORIGINAL work! Do not collaborate with other students or your clinical trainers as this is a violation of the DeVry Academic Integrity policy.
Submit your case study through the Dropbox. Late work will not be graded. Be sure to explain how you derived your cost calculations (show math).
Your lab is considering the purchase of a new Hematology Cell counter. You have evaluated many makes and models from several manufacturers and have narrowed the choice down to two. Both companies offer reagent rental agreements as one purchasing option. Based on the following information, calculate the costs for each. Restate the question in your responses.
1. State the total cost for each instrument and lease/purchase option.
2. Which instrument would you recommend #1 or #2 (assuming the instruments are comparable in all other aspects)? Would you recommend purchase or reagent rental of the instrument (based on total cost)?
3. Explain the pros and cons of both purchase and reagent rental. Give at least 2 pros and 2 cons for purchase and 2 pros and 2 cons for reagent rental.
Instrument 1
Instrument 2
Purchase
Lease
Purchase
Lease
Purchase price
$79,500.00
$0.00
$78,000.00
$0.00
Service Agreement (annual cost)
Assume: will be in place for 4 years
0.00
$16,310.00
0.00
Reagent Cost*
(Calculate rgt pricing for 5-year period)
$0.85/test
$1.05/test
$0.87/test
$1.11/test
* Reagent rental pricing based on a daily test volume of 250 samples/day, 365 days/year
Instrument 1
Instrument 2
Purchase
Lease
Purchase
Lease
Purchase price
$79,500.00
$0.00
$78,000.00
$0.00
Service Agreement (annual cost)
Assume: will be in place for 4 years
$16,310.000.00
$16,310.00
0.00
Reagent Cost*
(Calculate rgt pricing for 5-year period)
$0.85/test
$1.05/test
$0.87/test
$1.11/test
Explanation / Answer
Instrument 1
Instrument 2
Purchase
Lease
Purchase
Lease
Purchase price
$79,500.00
$0.00
$78,000.00
$0.00
Service Agreement (annual cost) Assume: will be in place for 4 years
$16,310.00
0
$16,310.00
0
Reagent Cost* (Calculate rgt pricing for 5-year period)
$0.85/test
$1.05/test
$0.87/test
$1.11/test
Reagent Cost (Annual)
$77,563
$95,813
$79,388
$101,288
Total Costs (Annual)
$173,373
$95,813
$173,698
$101,288
* Reagent rental pricing based on a daily test volume of 250 samples/day, 365 day
(a) The cost of leasing instrument 1 is the least. These costs are annual and the calculations are as follows
Total Costs = Purchase price + Service Agreement (annual cost) + Reagent Cost (Annual)
Instrument1
Purchase =$79,500.00 +$16,310.00 +$77,563(0.85*250*365) = $173,373
Lease = $95,813 (1.05*250*365)
Instrument2
Purchase =$78,000.00 +$16,310.00 +$79,388 (0.87*250*365) = $173,698
Lease = $101,288 (1.11*250*365)
The least cost are involved in leasing equipment 1. All costs have been calculated for 1 year.
(b) The instrument 1 will be recommended and may be leased as the cost of leasing is about 55% of the cost of purchasing the equipment.
(c) Pros for Purchasing
-the average costs will come down with every unit of sample.
-the equipment can be customized as per the needs
Cons for purchasing
- the equipment wear and tear costs
-the equipment will get outdated after a number of years
Pros for Leasing
-the equipment will be new and advanced and no wear and tear costs
-No liability of any sort and no hassles in production with higher returns
Cons
-Leasing in the long run may cost more than purchasing the equipment
-termination of lease contract may cost penalties and termination fees
Instrument 1
Instrument 2
Purchase
Lease
Purchase
Lease
Purchase price
$79,500.00
$0.00
$78,000.00
$0.00
Service Agreement (annual cost) Assume: will be in place for 4 years
$16,310.00
0
$16,310.00
0
Reagent Cost* (Calculate rgt pricing for 5-year period)
$0.85/test
$1.05/test
$0.87/test
$1.11/test
Reagent Cost (Annual)
$77,563
$95,813
$79,388
$101,288
Total Costs (Annual)
$173,373
$95,813
$173,698
$101,288
* Reagent rental pricing based on a daily test volume of 250 samples/day, 365 day
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