A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 B C D Luminaire Prices Typical Alternate LED $ $ $ # of Poles 23 $ 33 $ 33 $ Total Electricity Costs Typical Alternate LED Annual kWh 233,000 161,000 98,000 Annual Maintenance Costs Typical Alternate LED G H I J K L M N O $ $ $ Total Costs 77,800 103,800 146,800 0 $ 77,800 $ 77,800 1 $ 20,970.00 $ 3,476.00 $ 24,446 2 $ 20,970.00 $ 3,476.00 $ 24,446 3 $ 20,970.00 $ 3,476.00 $ 24,446 4 $ 20,970.00 $ 3,476.00 $ 24,446 5 $ 20,970.00 $ 3,476.00 $ 24,446 6 $ 20,970.00 $ 3,476.00 $ 24,446 7 $ 20,970.00 $ 3,476.00 $ 24,446 8 $ 20,970.00 $ 3,476.00 $ 24,446 9 $ 20,970.00 $ 3,476.00 $ 24,446 10 $ 20,970.00 $ 3,476.00 $ 24,446 $ 257,724.69 =NPV(D3,F35:O35)+E35 t Alternate Total Installation costs Annual electricity costs Annual maintenance costs Total Life Cycle costs 0 $ $ 1 2 3 4 5 6 7 8 9 10 103,800 103,800 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 14,490.00 $ 5,476.00 $ 19,966 $ 250,751.50 =NPV(D3,F45:O45)+E45 t 56 57 NPV (LED) Luminaire Prices 41,000 51,000 94,000 $ $ $ Annual $/kWh Costs 0.09 $ 20,970.00 0.09 $ 14,490.00 0.09 $ 8,820.00 t Typical Total Installation costs Annual electricity costs Annual maintenance costs Total Life Cycle costs LED Total Installation costs Annual electricity costs Annual maintenance costs Total Life Cycle costs Total Pole Per Pole Cost 1,600 $ 36,800 1,600 $ 52,800 1,600 $ 52,800 Annual Costs $ 3,476.00 $ 5,476.00 $ 1,840.00 46 47 NPV (Alternate) 48 49 50 51 52 53 54 55 F 41,000 51,000 94,000 Total Installation Costs (including Luminaire costs) Typical Alternate LED 36 37 NPV (Typical) 38 39 40 41 42 43 44 45 E GoGreen Supercenter - Energy Savings and Parking Lot Lighiting System Case LED Lighting Cost Analysis Cost of capital 6% 0 $ 146,800 $ 146,800 1 $ 8,820.00 $ 1,840.00 $ 10,660 2 $ 8,820.00 $ 1,840.00 $ 10,660 $ 225,258.53 =NPV(D3,F55:O55)+E55 3 $ 8,820.00 $ 1,840.00 $ 10,660 4 $ 8,820.00 $ 1,840.00 $ 10,660 5 $ 8,820.00 $ 1,840.00 $ 10,660 6 $ 8,820.00 $ 1,840.00 $ 10,660 7 $ 8,820.00 $ 1,840.00 $ 10,660 8 $ 8,820.00 $ 1,840.00 $ 10,660 9 $ 8,820.00 $ 1,840.00 $ 10,660 10 $ 8,820.00 $ 1,840.00 $ 10,660 ISSN 1940-204X GoGreen Supercenter: Energy Savings and Parking Lot Lighting System Case Donald Gribbin Professor of Accountancy Haworth College of Business Western Michigan University Jagjit S. Saini Associate Professor of Accountancy Haworth College of Business Western Michigan University INTRODUCTION GoGreen Inc. has supercenters worldwide. Lee Smith, chief executive officer (CEO), was troubled because of the recent negative coverage of the company by media and activists. Specific criticisms included GoGreen’s connections to human rights abuses associated with working conditions at their stores. During this period of criticism, a hurricane struck the Gulf Coast. One store manager of a GoGreen branch in the Gulf Coast went out of her way to help the community in need and provided people with essential supplies from the GoGreen store. The media and activists took notice of this incident and praised the company for its efforts. This brought in some positive media coverage for GoGreen. After this incident, Lee decided to change the company’s focus to improve the brand image of GoGreen in the eyes of public. The company decided to focus on three Ps— profit, people, and planet. Lee believes that including people and planet along with profit will also justify the company name. Specifically, GoGreen decided to include sustainability as a part of the company’s strategy and established four new goals—minimizing waste, using renewable energy, enhancing customer safety, and selling sustainable environmentally friendly products. With these goals, the CEO launched one of the company’s biggest sustainability initiatives. One of the several initiatives focused on energy savings. The company plans to overhaul its refrigeration and lighting systems and use more renewable energy to lower the energy usage at various store locations. In this regard, GoGreen is interested in any cost savings that might be generated by using a lightemitting diode (LED)-type lighting system in its parking lots. LED systems have greater installation costs but use less energy and require less maintenance over their life. Thus, an important question is, can the LED systems pay for themselves over their life due to lifecycle cost savings? In addition to being concerned about cost-related issues, GoGreen also wants to be recognized as an environmentally IMA EDUC ATIONAL CASE J OURNAL VOL . 1 4 , NO . 2, A R T. 2, J U N E 2021 ©2021 IMA 1 friendly company and be able to promote this project as one sustainability-related initiative to enhance its image. GoGreen is also concerned about customer safety and wants to have enough light in its parking lots for customers to feel safe at night. Additionally, GoGreen wants to be recognized as a good neighbor and doesn’t want its parking lot lights to be a distraction to its residential neighbors. GoGreen’s management has identified three parking lot lighting systems as viable options. The following briefly describes the three parking lot lighting (design) systems for a supercenter branch in Oregon that was chosen to analyze the effect of this initiative. System I—Typical Design The Typical Design is the system currently used by GoGreen. This luminaire design uses 1000W rated lamps, which provides sufficient illumination, but consume excess energy.1 Retailers typically use higher levels of illumination than specifications to attract customers or to provide customers enhanced personal security. Since the power density of the Typical Design exceeds the design requirement specifications, another system, which is referred to as the Alternate Design that consumes less energy was selected for comparison purposes. System II—Alternate Design The Alternate Design uses less energy than the Typical Design and uses 400W rated lamps. The Alternate Design meets the parking lot requirement specifications but does not provide the high level of illumination as provided by the Typical Design. The Alternate Design uses less energy than the Typical Design but more energy than the LED Design (System III). System III—LED Design The LED Design is the most energy-efficient system but has the highest installation cost of all the systems. The high installation cost of the LED Design system is partly because of the lower level of illumination that results in more light poles required for the same size parking lot. Also, LED luminaires are costlier than the luminaires for the other two designs. COST INFORMATION Management conducted research on the costs associated with the three types of lighting systems. These costs are discussed next. Luminaire Costs Luminaires are the light fixtures attached to the top of the poles. The light fixtures include the costs of the bulbs. Below are the luminaire costs for each type of parking lot design system. These are “one time” costs and will not be incurred annually. Design System 1 Luminaire Costs Typical $41,000 Alternate $51,000 LED $94,000 Luminaires are the light fixtures attached to the top of the poles. IMA EDUC ATIONAL CASE J OURNAL VOL . 1 4 , NO . 2, A R T. 2, J U N E 2021 ©2021 IMA 2 Other Installation Costs The only installation costs, other than the luminaire costs, are material and labor costs for the poles. Since the illumination of the Alternate Design and LED Design systems is not as bright as the Typical Design, they require more poles resulting in greater pole costs. Details of material and labor costs for installation of poles for each type of parking lot design system are as follows. # of Poles Material & Labor Cost per Pole Typical 23 $1,600 Alternate 33 $1,600 LED 33 $1,600 Design System Energy Usage and Electricity Costs Energy usage for each type of light design system has been accumulated by company management. The estimated electricity cost to be used in the analysis is $0.09/kWh. This is a conservative estimate as the average energy cost in the United States is more than $0.10/kWh. Design System Annual kWh Typical 233,000 Alternate 161,000 LED 98,000 Maintenance Costs The LED bulbs last longer than the conventional bulbs and, therefore, result in lower maintenance costs for the LED Design. Below are the annual maintenance costs of each design system. Design System Annual Maintenance Costs Typical $3,476 Alternate $5,476 LED $1,840 YOUR ASSIGNMENT You have been engaged as a cost consultant to help GoGreen Supercenter analyze the three different types of lighting systems for its parking lots. For the initial analysis, assume GoGreen Supercenter’s cost of capital is 6%. Also, for the purpose of the cost comparison use a 10-year life for the parking lot light design system. For the purpose of brevity, ignore income taxes. Acronyms and Abbreviations kWh kilowatt-hour(s) LED light-emitting diode IMA EDUC ATIONAL CASE J OURNAL VOL . 1 4 , NO . 2, A R T. 2, J U N E 2021 ©2021 IMA 3 ABOUT IMA® (INSTITUTE OF MANAGEMENT ACCOUNTANTS) IMA®, the association of accountants and financial professionals in business, is a global professional association focused exclusively on advancing the management accounting profession. IMA supports the profession through research, teaching cases, the CMA® (Certified Management Accountant) program, continuing education, networking and advocacy of the highest ethical business practices. IMA has a global network of more than 140,000 members in 140 countries and 300 professional and student chapters. For more information, please visit www.imanet.org. IMA EDUC ATIONAL CASE J OURNAL VOL . 1 4 , NO . 2, A R T. 2, J U N E 2021 ©2021 IMA 4
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