Amc Construction Pricining

AMD Construction Pricing Decisions

The capital equipment acquisition is a big decision for any firm. This process has major effects on the finances of organization. Only the top management players make the decision on whether a capital equipment purchase is made and normally is advised by a specialist who is a subject matter expert in this specific field.

The "acquisition of capital equipment involves the allocation and commitment of funds. These investments usually require significant expenditures and are made with the expectation that the returns will be extended over several years." (Benton, 2010, p.373). Specific timing is required to ensure that the organization which is making the purchase is taken care of financially due to the finality of the purchase.

The process is described by W.C. Benton in figure 16. 1, page 362 of the text is listed below:

• Departmental request- “Is initiated with a department requesting equipment replacements and expansions." (Benton, 2010, p. 363)

• Company goals-The acquisition is a comparison of the request against the company goals.

• New project ideas-The breakdown and determination of the category for the purchase. i.e. (Replacement, expansion, existing, other). This process enhances the organization by improving quality, lowering costs or improving efficiency.

• Cash Flow analysis-This process looks at net cash investment and flow and the life cycle of the product obtained.

• Economic evaluation-This is the step that determines the profit index for the purchase.

• Selection of projects-This is a simple process that determines acceptance or rejection of the proposal.

• Financial plan analysis-This is accomplished by one of two ways: Traditional loans and Leases. This process determines which process is best for the organization financially.

• Implementation phase-The purchase is approved.

• Expenditure control-This is a critical phase where the monies and acquisition is very important to stay within budget...