The question asks you to calculate cost savings by switching a diesel vehicle to electric vehicle. They have given the new maintenance cost, efficiency costs and upfront/one-off costs for the electric vehicle. Can we add the upfront costs to the other 2 cost categories here? Do you ever add upfront costs to other cost categories or always treat it separately?
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Hi there,
Am I right in thinking this is Diesel Transportation Co from the Ross casebook? :)
You need to "normalize" the data. So, either upfront costs have to be turned into per unit costs, or your per unit costs need to be multiplied out by # of units to get the total new costs.
Ultimately, you have to compare apples to apples to understand the net cost savings.
