NEU is planning to replace the current incandescent bulbs with energy efficient

Question

NEU is planning to replace the current incandescent bulbs with energy efficient LED lamps in the classrooms. In response to their request for proposal, NEU received two proposals. The details of the proposal are given below.  Use life cycle costs to recommend a system for NEU. Show the calculations to support your recommendations.

Company A Company C Fixture cost including installation $ 35,000 55,000 Life in years 10 10 Insurance per month $ 75 100 Electricity Consumption per month KWH 9000 6000 Electricity rate cents/kwh 15 15 Maintenance charges per quarter $ 350 400 Fixture Overhaul and cleaning - number per year 3 5 in two years Supply Cost per overhaul $ 900 600 Number of labor hours per overhaul 5 10 Labor rate for overhaul $/hour 60 120

Explanation / Answer

The proposal from Company C is recommended since its lifecycle costs are lower.

Company A Company C Fixture cost including installation 35000 55000 Insurance 9000 12000 ($75 x 12 x 10) ($100 x 12 x 10) Electricity 162000 108000 (9000 x 12 x 10 x $0.15) (6000 x 12 x 10 x $0.15) Maintenance charges 14000 16000 ($350 x 4 x 10) ($400 x 4 x 10) Fixture overhaul and cleaning: Supply cost 27000 15000 (3 x 10 x $900) (10/2 x 5 x $600) Labor cost 9000 30000 (3 x 10 x 5 x $60) (10/2 x 5 x 10 x $120) Total Life Cycle Cost $ 256000 236000

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