The acquisition cost is $35,000 paid at the time of installation. It reduces the wait staff by one person: Figure $10 per hour, or 2020 hours per year + 18% benefits. Money costs are 7% .The system may become obsolete in three years.
To calculate the total cost of the acquisition and its impact on the wait staff, you need to consider several factors: the upfront cost, the cost savings from reduced staff, the cost of money, and the potential obsolescence of the system.
1. Upfront Cost:
The acquisition cost is given as $35,000, which is paid at the time of installation.
2. Staff Cost savings:
The system reduces the wait staff by one person. To determine the cost savings, we need to calculate the annual cost of the staff member that is no longer required.
a. Hourly Wage:
Given that the wait staff member's wage is $10 per hour, the annual wage before benefits can be calculated as:
Annual Wage = Hourly Wage x Annual Hours
Annual Wage = $10 x 2020 hours (assuming a 40-hour workweek and 51 weeks per year, allowing for vacation and holidays)
b. Benefits:
The benefits are given as 18% of the annual wage.
Benefits = 18% x Annual Wage
c. Total Cost savings:
Total Cost savings = Annual Wage + Benefits
3. Cost of Money:
The money costs are provided as 7%. This represents the opportunity cost of investing the money elsewhere. To calculate this cost, you need to multiply the upfront cost by the interest rate:
Cost of Money = Upfront Cost x Interest Rate
4. Potential Obsolescence:
The system may become obsolete in three years. This implies that after three years, its value will decrease to zero.
To calculate the total cost over a three-year period, you need to consider all the factors mentioned above:
Total Cost = Upfront Cost + (Total Cost savings x 3 years) + Cost of Money
You can plug in the provided values into the equations to calculate the total cost.