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Total cost of ownership (TCO) vs Total cost of acquisition (TCA)
Total cost of ownership (TCO) is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system. It is a management accounting concept that can be used in full cost accounting or even ecological economics where it includes social costs.


Total cost of acquisition (TCA) is a managerial accounting concept that includes all the costs associated with buying goods, services, or assets. Generally, it is the net price plus other costs needed to purchase the item and get it to the point of use.

In product manufacturing or servicing provisioning, there will always have a base cost and then the market value.

Base cost meaning the expenses that is spent to deliver the product or service. A company should not make losses therefore base cost is the lowest possible region they can go. By knowing the TCO of a product, you will know what is the margin you want to make or if you are buyer, you can make a good bargain base on that. Most of the product can have a measurable TCO, unless it is high commodity products or jewelries and equivalent.

A item like property, jewelry, antique or art piece has their TCO defined long ago and it is usually very low. However due to appreciation and inflation and scarcity, these items are solely priced at market value instead. The TCA of getting these items become very subjective and it will be determined by the market value. Property have a better gauging system because information are highly available and it can be compared with other units around it. Art piece and antique on the other hand is usually rare and some have only one in the entire world, there is no precedence benchmark that could be used.

There are advantageous and disadvantageous of a base cost and market value item. Having a base cost will be good to justify your product and improve your future process line base on the order. The downside will be you can never up-sell a product too high with fixed TCO.

Having a market value item sure can have a high margin as long as there is high demand. The downside is the item can be unsold for too long and your cashflow is tied with that investment.
Then what will be main difference between TCO and TCA?
Good to know that.
Thanks for the post.......
(20-10-2016, 01:17 PM)Steve Wrote: Then what will be main difference between TCO and TCA?

Ownership will usually be the cost price of a product.

Acquisition depends on the market value of a product.
I hope it is as simple as you think.

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