Assignment:

You are the Chief Information Officer (CIO) of a large manufacturing company. Profits have been down over the last few years and the CEO has noticed that IT expenditures have substantially increased during this time. In a recent meeting you mentioned that a standard

PC Build for the company costs $893.00. The CEO has mentioned that she feels the total cost is substantially higher and wants to know the total cost of ownership (TCO) per PC in order to get a better handle on company expenditures. Because of the company's current situation, a decision needs to be made regarding employee and budget cuts in the IT Department. The break point is $5,300 if the total cost of ownership per PC is more than this amount the CEO suggests cutting two positions in the IT Department. If the total cost of ownership is less than $5,300 these cuts will not have to be made.

As CIO you are being tasked with determining the total cost of ownership for a single PC. In order to accomplish this you must gather the following information and create a total cost ownership calculator utilizing Microsoft Excel. This tool will act as your decision support system once you have calculated the TCO per PC. Since the budget cycle is approaching, the CEO is asking that you provide her this information no later than the morning of August 11th 2014 at 8:AM This is when she will be making a decision on employee and budget cuts in order for the company to remain profitable in the upcoming years.

The CEO is also asking that you provide a two to three page management recommendation on the problem at hand and how this total cost ownership tool will assist in making this important decision. Finally, the CEO would like for you to present your management summary findings to the board of directors using a Prezi presentation (www.prezi.com) No PowerPoint!

ORGANIZATION INFORMATION

Total Company personal computers: 926

End Users of PC's: 716

Average PC end users Salary: $48,893

Number of work hours in a year: 1760

DIRECT COSTS

HARDWARE AND SOFTWARE

Hardware Expenses in an average year : $525,867

Software Expenses in an average year: $195,567

Annual computer supplies: $82,988

Subtract Annual depreciation on hardware and software capital purchases: $45,887

Total annual hardware and software direct costs: (calculation)

MANAGEMENT AND STAFF SALARIES

Help Desk Personnel: $168,900

System Administration Personnel: $193,887

Network Administration Personnel: $192,534

Internal Training Personnel: $53,500

General End User Support Personnel: $43,000

IT Management Salaries: $211,392

Total IT Management and Staff Salary plus 30% overhead to account for salary increases (calculation):

OTHER EXPENSES

Travel Costs for above personnel: $45,000

Annual consulting and professional services fees related to infrastructure: $25,000

$30,000 is spent annually for training infrastructure personnel

$125,000 is spent annually on maintenance contracts

There was a minimal outsourcing cost of $2500

Total Other Management Expenses: (calculation)

DEVELOPMENT COSTS

Costs incurred for new application development areas are as follows:

Design $45,000

Development $47,500

Testing $35,000

Documentation: $10,000

Existing application maintenance areas: $125,000

Consulting fees and professional services: $25,000

Total annual development costs: (Calculation)

COMMUNICATION COSTS

Leased Lines $122,000

Remote Access Communications $167,000

Annual WAN (Wide Area Network) costs $145,000

Total Communication costs: (Calculation)

TOTAL DIRECT COSTS: (Calculation)

Hint: Total Hardware and Software costs plus Total IT Management and Staff Salaries plus Total Other Management Expenses plus Total Annual Development Costs plus Total Communication Costs

INDIRECT COSTS

END USER ACTIVITY

40 hours annually on PC user training

25 hours annually on local file maintenance

Annual cost of individual end user IT Activity: (Calculation)

Hint: Average PC end user salary divided by number of work hours in a year. Multiply this number by the total number of hours on PC training and Local File Maintenance. Then multiply this number by total company Personal Computers in the organization

DOWNTIME

The Company loses 1.5 hours per month of end-user productivity due to planned or

unplanned downtime.

Total person hours lost annually due to downtime:

Hint: Total number of hours lost per month of end user productivity multiplied by number of months in a year multiplied by total number of end users in the company

Total annual cost of downtime:

Hint: Average PC end users salary divided by number of work hours in a year then multiply this number by total person hours lost annually due to downtime.

TOTAL INDIRECT COSTS: (Calculation)

Hint: Total annual cost of End User IT activity plus Total Annual Cost of Downtime

FINAL CALCULATIONS:

Total annual infrastructure costs: (calculation)

Total Direct Costs plus Total Indirect Costs

TOTAL COST OF OWNERSHIP PER PC: (Calculation)

Total annual infrastructure costs divided by total company personal computers.