ITPEC IP April 2024 Question 15

(iii) and (iv), the system's software and hardware maintenance — TCO is what the sales management system itself costs to own.

TCO (Total Cost of Ownership) adds up every cost of a system over its life: the initial costs of hardware, software and development, and the running costs of operation, maintenance, support and training. Test each item as a cost of owning the system:

• •(i) purchase cost of the products the system handles — the cost of the goods being sold, which arises whether sales are recorded by the system or on paper: not included
• •(ii) shipment cost of those products — a logistics cost of the sales business, also not caused by the system: not included
• •(iii) software maintenance cost of the system — a running cost of the system: included
• •(iv) hardware maintenance cost of the system — a running cost of the system: included

Answer (d)

Why not others:

• •(a) — (i) and (ii) are both costs of the goods the system handles, and the two maintenance costs are left out
• •(b) — counts the product purchase cost (i) and leaves out the software maintenance cost (iii)
• •(c) — counts the product shipment cost (ii) and leaves out the hardware maintenance cost (iv)

Key rule: TCO covers a system's whole life, from installation through operation and maintenance, not just its purchase price; the costs of the business the system supports are not part of it.

System Component · AI-written, may contain errors