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What is life cycle cost (LCC)?
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This guidance note summarises what is meant by a life cycle costing (LCC) and whole life costing (WLC) service for both new construction works and for the refurbishment of existing assets. The guidance follows the guiding principles outlined in the BCIS/BSI publication PD15686-5 Standardized Method of Life Cycle Costing for Construction ...
- Lifecycle Costing, 1st edition
This guidance note summarises what is meant by a lifecycle...
- Lifecycle Costing, 1st edition
- Process
- Formula
- Example of Life Cycle Costing
- Applications of Life Cycle Costing
- Benefits
- Effects
We can break down the life cycle costing process into the following cost heads – initial investment, recurring cost, disposal cost, and residual value. 1. Initial Cost:It is either the purchase price of an item or the initial cost of the set-up in case of a project. In most cases, it also includes the cost of installation. 2. Recurring Cost: It rep...
We can derive the value of whole life costing by identifying all the cost heads and their corresponding period of occurrence, then discounting them to the present value, and then adding them up while deducting the present value of the residual value. Mathematically, it can be represented as, Life Cycle Costing Formula = Initial Cost + PV of All Rec...
Let us take the example of John, who wants to purchase a new car worth $12,000. Calculate the car's life cycle cost if John plans to sell the car after five years at a residual value of $3,000. As per estimates, the annual expense for maintenance & repair will be $1,000, and gas consumption per year will be another $3,500. Please consider the appli...
In capital budgeting, the life cycle costing is a critical component of the decision-making process (purchase of asset) as it is used to estimate the net cash flows and the expected return on inves...In the case of procurement, the department uses it to determine which is the least expensive item and accordingly place the orders.In engineering and production, this concept is used in developing and manufacturing goods that incur the least cost to the customer in terms of installation, operating, maintenance, disposal, etc.In the case of customer service, whole life costing is used to minimize the amount of replacement, warranty, and field service.It provides a precise estimate of the expected cost to be incurred over the asset's life span.It makes sure that the best decision is made based on an accurate and realistic estimate of costs.It ensures that the management takes early actions to lower recurring and non-recurring costs.The life cycle costing estimates help decision-making where a mutually exclusive option is available. Also, the management can plan to reduce the item's overall cost through the extension of useful life, efficient utilization, or other similar cost rationalization measures.
Life cycle costing is the economic analysis process that assesses the total cost of acquisition, ownership, and disposal of a product over a period of time. It includes a comparison between alternatives projects (including their externalities).
What Is Life Cycle Costing? Life cycle costing or LCC is defined as, Life cycle costing is a costing approach that considers all the possible costs that will be incurred from the idea stage to the disposal of the product. Life cycle costing is also called whole life costing.
What is Life Cycle Cost Analysis? Life cycle cost analysis (LCCA) is an approach used to assess the total cost of owning a facility or running a project. LCCA considers all the costs associated with obtaining, owning, and disposing of an investment.
Jun 15, 2022 · Life Cycle Cost (LCC), or whole-life costing, as the name suggests, deals with the total cost of an item during its lifetime. Or, we can say, it is the process to compile all costs that a company incurs over a life span of a product, service, asset, investment, project, structure, or system.
Apr 15, 2016 · This guidance note summarises what is meant by a lifecycle costing and whole life costing service for both new construction works and for the refurbishment of existing assets. This guidance is effective from 1 July 2016. Covered in this guidance note: standards and definitions; essentials of lifecycle costing; worked examples.
