Cost savings with upfront costs

case math
New answer on Jul 20, 2021
1 Answer
500 Views
Anonymous A asked on Jul 19, 2021

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?

(edited)

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Best answer
Ian
Expert
Content Creator
replied on Jul 20, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

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.

Was this answer helpful?
Ian gave the best answer

Ian

Content Creator
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate
1,088
Meetings
76,173
Q&A Upvotes
227
Awards
5.0
150 Reviews
How likely are you to recommend us to a friend or fellow student?
0
1
2
3
4
5
6
7
8
9
10
0 = Not likely
10 = Very likely