Question

How is life cycle costing model selected and developed?

Answer 1

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ANSWER:

Owners, users and managers need to make decisions on the acquisition and ongoing use of many different assets including items of equipment and the facilities to house them. The initial capital outlay cost is usually clearly defined and is often a key factor influencing the choice of asset given a number of alternatives from which to select.

The initial capital outlay cost is, however, only a portion of the costs over an asset’s life cycle that needs to be considered in making the right choice for asset investment. The process of identifying and documenting all the costs involved over the life of an asset is known as Life Cycle Costing (LCC).

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Answer 2

Life-cycle cost analysis is a method for assessing the ‘total cost of facility’ ownership. It is developed by adding up the expenses for every stage of the life cycle to find the total. One can make use of the past data for creating an accurate cost prediction.  

Explanation:

• The ‘life cycle cost’ analysis takes into account the different costs of ‘acquiring’, owning, and disposing of a ‘building or building system’.  

• The ‘life cycle cost analysis’ is useful when ‘project alternatives’ need to be compared for selecting the one that maximizes the net savings for fulfilling the ‘same performance requirements’ but differs with respect to ‘initial costs and operating costs’.  

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