CVS CVS Cost Analysis and Life Cycle Costing Questions and Answers 2

Question 1

Which of the following is an example of a 'disposal cost' in Life Cycle Cost analysis?

Accepted Answer

Decommissioning and environmental remediation at end of service life

Answer

Disposal costs include end-of-life expenses such as decommissioning, demolition, waste disposal, and environmental cleanup.

Question 2

Sensitivity analysis in VM LCC studies is performed to:

Accepted Answer

Test how changes in key assumptions affect the results and identify critical cost drivers

Answer

Sensitivity analysis tests the robustness of LCC conclusions by varying uncertain inputs (e.g., discount rate, maintenance frequency) to see which assumptions matter most.

Question 3

The discount rate used in Life Cycle Cost analysis primarily accounts for:

Accepted Answer

The time value of money and opportunity cost of capital

Answer

The discount rate reflects the fact that money available today is worth more than the same amount in the future, enabling fair comparison of costs across time.

Question 4

When performing function cost allocation, indirect costs are typically:

Accepted Answer

Distributed to functions based on a reasonable allocation method such as labor hours or space

Answer

Indirect costs are allocated to functions proportionally, ensuring a complete and accurate picture of each function's true cost.

Question 5

A VM team compares two HVAC design alternatives using LCC. Alternative A has a lower first cost but higher annual energy use. Alternative B costs more upfront but is energy-efficient. VM recommends:

Accepted Answer

Evaluate the present worth of total life cycle costs before choosing

Answer

VM requires a complete LCC comparison, discounting all future costs to present value, before making a recommendation that optimizes true value.

CVS - Certified Value Specialist Practice Test

CVS - Certified Value Specialist Practice Test

CVS CVS Cost Analysis and Life Cycle Costing Questions and Answers 2