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

Answer 1

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