Whole life costing is an investment appraisal and management tool which assesses the total cost of an asset over its whole life. It takes account of the initial capital cost, as well as operational, maintenance, repair, upgrade and eventual disposal costs. Broadly, life cycle costs are those associated directly with constructing and operating the building; while whole life costs include other costs such as land, income. Whole-life cost, or Life-cycle cost (LCC), refers to the total cost of ownership over the life of an Whole-life costing is a key component in the economic appraisal associated with evaluating asset acquisition proposals. An economic appraisal is Financial · Environmental and social · Whole-life cost topics · IT industry usage.
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Costs Extend Over an Asset's Useful Life The value of determining whole life cost can be demonstrated when considering whole life costing purchase of a large piece of equipment for a factory.
We can show how your asset compares against others, what you can do to improve, and help you demonstrate value for money.
Likewise, the costs of running and maintaining an office building are whole life costing times the cost of building it. This title is available as a book and a bookmarked Whole life costing.
Whole-life cost - Wikipedia
It is also applied to comparisons of actual costs for similar asset types and as feedback into future design and acquisition decisions. The primary benefit is that whole life costing which occur after an asset has been constructed or acquired, such as maintenance, operation, disposal, become an important consideration in decision-making.
Previously, the focus has been on whole life costing up-front capital costs of creation or acquisition, and organisations may have failed to take account of the longer-term costs of an asset. It also allows an analysis of business function interrelationships.
Low development costs may lead to high maintenance or customer service costs in the future. When making this calculation, whole life costing depreciation cost on the capital expense should not be included refer page 2 of  Environmental and social[ edit ] Main article: Life cycle assessment The use of environmental costs in a whole-life analysis allows a true comparison options, especially where both are quoted as "good" for whole life costing environment.
Future cost flows are discounted by a rate that relates present and future money values — which may include an allowance for inflationary changes.