An analysis of the total cost of ownership (TCO), when making purchasing decisions, shows that the costs for additional training, upgrades, maintenance, repair, and other expenses are usually much smaller than the cost of acquisition. True or False?

Question

Business

Gianni

2 June, 19:09

An analysis of the total cost of ownership (TCO), when making purchasing decisions, shows that the costs for additional training, upgrades, maintenance, repair, and other expenses are usually much smaller than the cost of acquisition. True or False?

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Amber Ortiz · Answer 1

false

Explanation:

No two companies are the same, so you cannot assume that something that was true for one company will be true for another especially when you consider human resources and production related activities.

A company might be very profitable and can be worth tons of money but its management can be disastrous. For example, when Bill Gates was the CEO of Microsoft, he was the first person to acknowledge that his company was managed by cavemen. They burnt cash like crazy and their whole organization was a mess. The fact that they had a monopoly with Windows and Office was the only reason why they were still functional and profitable.

Sometimes factories are very profitable but use very old equipment and machinery, and their maintenance and repair costs may be huge. Or maybe the opposite may happen, a company may have invested too much money in new modern equipment.

Even if a company is managed perfectly and everything is under control, new equipment, new offices, huge sales numbers, etc. But it uses a different ERP software than its potential buyer, and that may be a very expensive issue to solve.