What Is The Purpose Of Life Cycle Costing?

1.8 Life Cycle Costing.

Life Cycle Costing (LCC) is an important economic analysis used in the selection of alternatives that impact both pending and future costs.

It compares initial investment options and identifies the least cost alternatives for a twenty year period.

What is the meaning of life cycle costing?

Life cycle costing is the process of compiling all costs that the owner or producer of an asset will incur over its lifespan. In the engineering and production areas, life cycle costing is used to develop and manufacture goods that will have the least cost to the customer to install, operate, maintain, and dispose of.

What are the benefits of life cycle costing?

The following are the benefits of product life cycle costing: (i) It results in earlier actions to generate revenue or to lower costs than otherwise might be considered. (ii) It ensures better decision from a more accurate and realistic assessment of revenues and costs, at-least within a particular life cycle stage.

What is the purpose of a life cycle cost analysis LCCA?

Life-Cycle Cost Analysis (LCCA) Method. The purpose of an LCCA is to estimate the overall costs of project alternatives and to select the design that ensures the facility will provide the lowest overall cost of ownership consistent with its quality and function.

What is the difference between whole life costing and life cycle costing?

Broadly, life cycle costs are those associated directly with constructing and operating the building; while whole life costs include other costs such as land, income from the building and support costs associated with the activity within the building.

What is the life cycle cost of a building?

Life cycle costs (LCC) in general consist of an initial investment (usually construction costs) and the follow-on costs (ordinary payments, i.e. energy, utilities, cleaning and maintenance, irregular costs for renewal or replacement), while some life cycle costing methods also include the costs of demolition [3].

What is standard costing method?

Standard costing is the practice of substituting an expected cost for an actual cost in the accounting records. Subsequently, variances are recorded to show the difference between the expected and actual costs.

What are the stages of a product life cycle?

The product life cycle traditionally consists of four stages: Introduction, Growth, Maturity and Decline.

What is a TCO model?

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.

Which cost is considered in life cycle cost analysis?

Life-cycle cost analysis (LCCA) is the study of all the costs associated with processes, materials and goods from acquisition to ownership and maintenance, through to and including disposal.