Life Cycle Costing & Total Cost of Ownership Flashcards
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Which ASTM standard is the primary guide for Life Cycle Cost Analysis (LCCA) of buildings and building systems?
Answer: ASTM E917
ASTM E917 is the standard practice for measuring life-cycle costs of buildings and building systems.
Life Cycle Cost (LCC) analysis is BEST defined as:
Answer: The total cost of acquisition, operation, maintenance, and disposal of an asset over its useful life
LCC encompasses all costs from acquisition through disposal, providing a complete economic picture of owning and operating an asset.
When performing LCCA, future costs are converted to present values using a:
Answer: Discount rate
A discount rate reflects the time value of money, converting future costs to their equivalent present-day value for fair comparison.
In Life Cycle Costing, the term 'salvage value' refers to:
Answer: The estimated residual value of an asset at the end of its useful life
Salvage value is the expected market or scrap value recoverable from an asset at the end of its service life, which reduces total LCC.
Which cost category typically constitutes the largest portion of Life Cycle Cost for a complex industrial facility?
Answer: Operations and maintenance cost over the facility's life
For most facilities, cumulative operations and maintenance costs far exceed initial capital costs over a typical 20–40 year service life.
The Uniform Present Worth (UPW) factor in LCCA is used to convert:
Answer: A series of equal annual costs to a present value equivalent
The UPW factor (also called the Present Worth of Annuity factor) converts a recurring uniform annual cost stream to a single present value.
A project has two alternatives: Alternative A with a lower first cost but higher annual maintenance, and Alternative B with a higher first cost but lower annual maintenance. The BEST method to select the economical choice is:
Answer: Calculate and compare the Life Cycle Cost of both alternatives at a common discount rate
LCCA compares total costs over the same study period using a common discount rate, which is the only method that accounts for both initial and recurring costs fairly.