Life Cycle Cost Analysis
Life Cycle Cost Analysis (LCCA) is the total cost assessment method over a project’s life cycle. It's especially useful when both the initial investment cost and the future operation and maintenance costs are significant in the decision making process. LCCA helps determine the economic effectiveness of a project by analyzing initial cost and discounted future costs, such as maintenance, user, reconstruction, rehabilitation, restoring, and resurfacing costs over a certain study period.
Guide to Life Cycle Cost Analysis
Life Cycle Cost Analysis (LCCA) is a method used to assess the total cost of ownership. It is important because it provides a detailed financial analysis that helps to make informed decisions on long term investments and to identify the cost implications of different design solutions.
What is Life Cycle Cost Analysis?
Life Cycle Cost Analysis is the process of evaluating the economic performance of a project by considering all the costs related to acquisition, operation, maintenance, and disposal of an investment throughout its life. This includes purchase, installation, operational, maintenance, and disposal costs.
How it Works
LCCA involves a series of steps: define the problem, identify feasible alternatives, identify all relevant costs, calculate the life-cycle costs of each alternative, and finally, interpret the results to make a decision.
Exam Tips: Answering Questions on Life Cycle Cost Analysis
When answering questions on LCCA in an exam, always start by defining terms. For calculations, ensure you know the initial investment cost, future costs like maintenance and operation, and any salvage value at the end of the project life. Be sure to consider all costs including economic, environmental, and social costs. Finally, practice lots of past questions to familiarize yourself with the format and style of questions.
Note: It is critical to always double-check your calculations. One small mistake could significantly affect your final result.
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