CVS CVS Cost Analysis and Life Cycle Costing Questions and Answers 1

Question 1

Life Cycle Cost (LCC) analysis in Value Methodology includes which major cost categories?

Accepted Answer

Acquisition, operation, maintenance, and disposal costs over the item's useful life

Answer

LCC encompasses all costs from acquisition through disposal, giving a complete picture of the true economic impact of a design decision.

Question 2

Why is Life Cycle Cost analysis important in a VM study?

Accepted Answer

It ensures that low initial cost alternatives are not selected if they have high operating or maintenance costs

Answer

LCC prevents decisions that minimize first cost at the expense of much higher long-term costs, ensuring true value is optimized.

Question 3

In the context of VM cost analysis, 'function cost' refers to:

Accepted Answer

The portion of total project cost attributable to performing a specific function

Answer

Function cost allocates total system cost to individual functions, enabling the team to identify which functions consume disproportionate resources.

Question 4

Which mathematical technique is commonly used in LCC analysis to compare costs occurring at different points in time?

Accepted Answer

Net Present Value (NPV) or Present Worth analysis

Answer

NPV/Present Worth analysis discounts future costs to today's dollars, allowing fair comparison of alternatives with different cost timing.

Question 5

A 'should-cost' model in VM is used to:

Accepted Answer

Estimate what a function or product should cost based on competitive benchmarks and first principles

Answer

Should-cost modeling establishes an independent cost target based on function worth and market data, independent of contractor or vendor quotes.

CVS - Certified Value Specialist Practice Test