Nora Ko March 3, 2014

Equipment Capital Budget Justification for Director

Reason for needing a new oven: The old oven sets on fire every tray of food that is put inside, regardless of the temperature. Name of Brand & Model of Ovens Selected from Fishnick: GAS OVEN: Garland (Moisture +) MP-GS-10-D ELECTRIC OVEN: Bakers Pride 454BCOER2 / 555041103004 Initial Cost of Purchase: Starting with gas convection ovens, we will first be examining the Garland (Selected from Fishnick). The initial cost of the Garland Oven is $4770, whereas the initial cost of the Base Efficiency Gas Oven is only $3042, and the starting cost of the Energy Star Gas Oven is $6069. As for the electric ovens, the initial cost of the selected oven, Bakers Pride, is $3049, whereas the Base Efficiency Oven costs only $2160 initially, and the Energy Star Oven starting cost is $5121. Thus, the least expensive initial cost of these six ovens is the Base Efficiency Electric Oven, costing $2160, and the most expensive initial cost is the Energy Star Gas Oven, costing $6069, nearly three times the price of the cheapest one. In general, the initial costs of the two Energy Star Ovens are significantly more expensive than the other four ovens that are not Energy Star Ovens. Performance: Energy Efficiency Level Starting with the gas convections ovens once again, it appears that the Garland Gas Oven has a heavy-load energy efficiency level of 44%, whereas the energy efficiency of the Base Efficiency Gas Oven is only 30%. In contrast, the Energy Star Gas Oven (a.k.a. Energy Efficient Gas Oven) is the most efficient gas oven, with 45% in energy efficiency. In examining the electric ovens, the Bakers Pride Electric Oven is 44% energy efficient, whereas the Base Efficient Electric Oven is 65%. In sharp contrast, the Energy Star Electric Oven is the most efficient electric oven, being 73% energy efficient.

Thus, we can conclude that the Energy Star Electric Oven is the most efficient electric oven out of the six, while the Base Efficiency Gas Oven is the least energy efficient. The electric ovens in general are more efficient than the gas ovens. Performance: Production Capacity In comparing the production capacity of the gas ovens, we see that the Garland Gas Oven produces 94.0 lbs every hour, whereas the Base Efficiency Gas Oven produces 70.0 lbs per hour, and the Energy Efficient Gas Oven produces 83.0 lbs per hour. Upon comparing the production capacity of the electric ovens, we see that the Bakers Pride Electric Oven produces 94.0 lbs per hour, while the Base Efficiency Electric Oven produces 70.0 lbs/hr, and the Energy Efficient Electric Oven produces 82.0 lbs/hr. Look at the data, both the Garland Gas Oven and the Bakers Pride Electric Oven tie in the race for the largest production capacity, producing 94.0 lbs/hr. However, that does not matter because our foodservice facility typically needs to prepare 100 servings of 4-8 ounces of convection-baked goods during peak production periods. 100 serving times 8 ounces is 800 ounces total; 800 divided by 16 ounces in a pound equals 50 lbs. All of the ovens listed above have a production capacity much greater than 50 lbs, so the production capacity does not matter as much. Lifetime Cost: Energy, maintenance, and total The lifetime energy cost is $11, 172 for the Garland Gas Oven, $12, 624 for the Base Efficiency Gas Oven, and $8340 for the Energy Star Gas Oven, $42,588 for the Bakers Pride Electric Oven, $19,020 for the Base Efficiency Electric Oven, and $14,676 for the Energy Star Electric Oven. The Energy Star Gas Oven has the lowest lifetime energy cost. The lifetime maintenance cost is $1440 for the Garland, $1800 for the Base Efficiency Gas, $1164 for the Energy Star Gas, $1260 for the Bakers Pride Electric Oven, $1440 for the Base Efficiency Electric, $1056 for the Energy Star Electric Oven. Comparing the Lifetime maintenance costs, we see that the Energy Star Gas oven is the lowest in maintenance costs. Therefore, since the Energy Star Gas Oven has the lowest lifetime energy and the maintenance cost, it is the oven with the lowest total lifetime cost. This conclusion is verified when looking at the comparison charts; the Energy Star Gas Oven only costs $15,573, whereas every other oven costs significantly more. Gas versus Electric The electric ovens are general more energy efficient than the gas ovens are. However, the total lifetime costs of electric ovens are general significantly higher than the gas ovens. The initial costs of both gas and electric ovens are not significantly different.

Recommendation: I recommend the Energy Star Gas Oven because it has the lowest lifetime cost out of all the other five ovens, which can save the foodservice facility a lot of money over its twelve years of lifespan. The initial cost of this oven is $6069, which appears to be the most expensive oven compared to all other ovens, especially since the cheapest oven costs $2160. However, this mere difference of around $4000 is negligent when comparing the lifetime cost between the $15,573 Energy Star Gas Oven and the $22,620 Base Efficiency Electric Oven; the difference is around $7000 here, so purchasing the Energy Star Gas Oven would save the facility $7000 total in the long run compared to the Base Efficiency Electric Oven. When compared to the Energy Star Electric Oven, which has a lifetime cost of $20,853, the Energy Star Gas Oven saves the facility around $5000. Compared to the Bakers Pride Electric Oven, the Energy Star Gas oven saves the facility around $31,324 in the long-run! We have already established that all ovens in the choices meet the production capacity criteria, so that would not matter as much. Also, since the bottom line of our business is to make money, saving money on our capital would translate to earning money. Save a penny, earn a penny, as the saying goes. Therefore, I recommend the Energy Star Gas Oven because it has the lowest lifetime cost, and saves the most amount of money over the course of the next twelve years.