cost savingsaif known cost per unit B u s i n e s s F i n a n c e

I’m working on a excel project and need an explanation and answer to help me learn.

Hi, I need to make an Excel data set as well as a pivot table using the information below. I need to setup a chart that shows cost savings vs cost avoidance over a period of one year. We will need to include the business units, forecasted savings, actual savings. We will also need to put what the price would be if we did not negotiate vs if we did negotiate. Please set up the form correctly and use random numbers to fill the data set.

Savings will start for Jan 1 2022 until Dec 31, 2023. Savings will be recorded for a year only. If the savings will be what is actually

delivered (example – if savings start July 1, 2022, we would only get savings for 1/2)

Cost savings

A

If known cost per unit (e.g. Docusign per person) – Basis would be current cost per unit. Savings would be the difference between cost

per unit x units for the first year.

o example: Current cost for Docusign is $10 a year per user, new cost per user with docusign is $8. The number of users is 1,000

– ($10-$8) • 1000 = $2,000 savings

Other units could be per computer, per BU

New item

o Medium of first bid would be the basis and final item would be the

– Bidding out new GRC platform. Bids are 60K, 55K, 30K for one year. Medium bid is $55K

– Final bid with winner is $50K. Savings is $5K

Cost avoidance

If the supplier is raising prices, the basis will be what the new cost will be and what is negotiated is what is cost avoidance

o example: Docusign’s cost per user goes up from $10 to $15 a user. We are able to negotiate the price to $11

Cost avoidance would be ($15-$14) * 1000 users = $1000