Guide to Life Cycle Costing - PMBOK Guide Seventh Edition

Life Cycle Costing is a fundamental concept within the field of Project Cost Management, which includes the analysis and estimation of the total cost incurred during the entire life cycle of a product or a project. This involves considering all the relevant stages from inception to disposal.
Why is it important?
Life Cycle Costing is key to making informed decisions during the procurement and operational phases of a project. It helps you to select the most cost-effective options based on understanding the full cost implications over a product’s lifetime.
How does it work?
Life Cycle Costing works by considering the total cost of ownership. This includes acquisition, operation, maintenance, renovation, or disposal costs, offering a big picture of the financial impact over the entire life span of the product or project. It's an in-depth and long-term view of cost management.
How to answer questions regarding Life Cycle Costing in an exam?
For answering questions about Life Cycle Costing, it's essential to understand its components like, initial cost, operational costs, maintenance and support costs, and disposal costs. Real-world examples might be used to explain the concept clearly.
Exam Tips: Answering Questions on Life Cycle Costing
1. Remember, Life Cycle Costing isn’t just about the upfront costs. Consider all costs from initiation to disposal.
2. Focus on understanding the concept of 'Total Cost of Ownership'.
3. Practice with real-world questions or scenarios related to Life Cycle Costing.
4. Don’t rush in selecting options while answering, a lower initial cost doesn’t mean lower Life Cycle Cost.