Why is life-cycle costing (LCC) important to the facility manager?

Why is life-cycle costing (LCC) important to the facility manager?

• A. It can indicate when replacement may be more suitable than repair.
• B. It can be combined with the salvage value to estimate total cost of ownership (TCO).
• C. It eliminates the need to forecast costs for maintaining an asset.
• D. It is a more comprehensive measurement than total cost of ownership (TCO).

Answer: (D)

Life-cycle costing (LCC) is crucial for facility managers because it provides a holistic view of all costs associated with an asset over its entire lifespan. This includes not only the initial acquisition costs but also ongoing expenses such as maintenance, operation, and eventual disposal costs. By utilizing LCC, facility managers can make better-informed decisions about asset management, ensuring that they consider both short-term and long-term financial impacts. When comparing LCC to total cost of ownership (TCO), LCC encompasses a broader range of factors that contribute to overall costs. While TCO focuses on purchase price and direct costs, LCC includes factors like energy consumption, maintenance routines, and potential downtimes, which play significant roles in the total expenditure associated with an asset. This comprehensive approach allows facility managers to strategically plan and budget for assets, leading to more efficient resource allocation and ultimately better financial performance over time. Understanding this comprehensive measurement enables facility managers to compare options and determine the most cost-effective strategies, enhancing their operational efficiency and the overall value they provide to the organization.

Life-cycle costing (LCC) is crucial for facility managers because it provides a holistic view of all costs associated with an asset over its entire lifespan. This includes not only the initial acquisition costs but also ongoing expenses such as maintenance, operation, and eventual disposal costs. By utilizing LCC, facility managers can make better-informed decisions about asset management, ensuring that they consider both short-term and long-term financial impacts.

When comparing LCC to total cost of ownership (TCO), LCC encompasses a broader range of factors that contribute to overall costs. While TCO focuses on purchase price and direct costs, LCC includes factors like energy consumption, maintenance routines, and potential downtimes, which play significant roles in the total expenditure associated with an asset. This comprehensive approach allows facility managers to strategically plan and budget for assets, leading to more efficient resource allocation and ultimately better financial performance over time.

Understanding this comprehensive measurement enables facility managers to compare options and determine the most cost-effective strategies, enhancing their operational efficiency and the overall value they provide to the organization.