Life cycle costing is normally regarded as the process of economic analysis of the the whole life cycle of a product, namely: total cost of acquisition, ownership and disposal of a product. However, it can also be applied to the parts or combinations of different life cycle phases.
The primary objective of life cycle costing is to provide input to decision making in any or all phases of a product’s lifecycle.
Life Cycle Cost Models are developed to support selection of alternative design solutions based on Net Present Value or other profit / cost drivers.
Common applications for Life Cycle Cost Analysis include:
- Evaluation and comparison of alternative strategies for product use, operation , test, inspection, maintenance, etc.
- Evaluation and comparison of different approaches for for replacement, rehabilitation / life-extension or retirement of aging facilities
- Allocation of funds among the competing priorities for product development / improvement
- Long-term financial planning The scope and depth of analysis is normally tailored to meet the demands and complexities (or lack of them) in individual situations