CCE Life Cycle Costing & Total Cost of Ownership 3

Question 1

The federal government's primary source for discount rates to use in federal LCCA is:

Accepted Answer

OMB Circular A-94, which publishes annual real and nominal discount rates

Answer

OMB Circular A-94 provides the official real and nominal discount rates that federal agencies must use when conducting benefit-cost or life-cycle cost analyses.

Question 2

Energy cost escalation in LCCA is handled differently from general inflation because:

Accepted Answer

Energy prices historically escalate at rates different from the general Consumer Price Index

Answer

Energy prices follow their own commodity-driven escalation rates that often diverge from general CPI, so LCCA uses energy-specific escalation factors (often from DOE/NIST) for accuracy.

Question 3

In the context of Life Cycle Costing, 'externalities' refer to:

Accepted Answer

Costs incurred by parties outside the project that are not reflected in market prices

Answer

Externalities are social or environmental costs (e.g., pollution, noise) imposed on third parties that the owner does not pay directly but which represent real economic impacts sometimes included in comprehensive LCC.

Question 4

A Net Present Value (NPV) comparison in LCCA that yields a negative NPV for the incremental investment means:

Accepted Answer

The base alternative is the more economical choice

Answer

A negative NPV on the incremental investment means the additional savings generated by the more expensive alternative do not justify its extra cost, making the base alternative more economical.

Question 5

Which LCC cost element encompasses costs associated with personnel training, documentation, and technical support for an installed system?

Accepted Answer

Operations and support costs

Answer

Training, documentation, and technical support are components of ongoing operations and support costs that persist throughout the system's operational life.

CCE - Certified Cost Engineer Practice Test

CCE - Certified Cost Engineer Practice Test

CCE Life Cycle Costing & Total Cost of Ownership 3