CCE Life Cycle Costing & Total Cost of Ownership 1 — Questions and Answers
Question 1: Which ASTM standard is the primary guide for Life Cycle Cost Analysis (LCCA) of buildings and building systems?
- ASTM E1557
- ASTM E917 (Correct answer)
- ASTM E2103
- ASTM E1699
Correct answer: ASTM E917
ASTM E917 is the standard practice for measuring life-cycle costs of buildings and building systems.
Question 2: Life Cycle Cost (LCC) analysis is BEST defined as:
- The sum of all capital expenditures for a project
- The total cost of acquisition, operation, maintenance, and disposal of an asset over its useful life (Correct answer)
- The net present value of future revenues minus initial investment
- The annual operating budget multiplied by the expected service life
Correct answer: The total cost of acquisition, operation, maintenance, and disposal of an asset over its useful life
LCC encompasses all costs from acquisition through disposal, providing a complete economic picture of owning and operating an asset.
Question 3: When performing LCCA, future costs are converted to present values using a:
- Inflation escalation factor
- Discount rate (Correct answer)
- Productivity index
- Cost performance index
Correct answer: Discount rate
A discount rate reflects the time value of money, converting future costs to their equivalent present-day value for fair comparison.
Question 4: In Life Cycle Costing, the term 'salvage value' refers to:
- The original purchase price of the asset
- The cost to repair a damaged asset
- The estimated residual value of an asset at the end of its useful life (Correct answer)
- The insurance payout upon total loss of the asset
Correct answer: The estimated residual value of an asset at the end of its useful life
Salvage value is the expected market or scrap value recoverable from an asset at the end of its service life, which reduces total LCC.
Question 5: Which cost category typically constitutes the largest portion of Life Cycle Cost for a complex industrial facility?
- Initial capital/acquisition cost
- Decommissioning and disposal cost
- Operations and maintenance cost over the facility's life (Correct answer)
- Permitting and regulatory compliance cost
Correct answer: Operations and maintenance cost over the facility's life
For most facilities, cumulative operations and maintenance costs far exceed initial capital costs over a typical 20–40 year service life.
Question 6: The Uniform Present Worth (UPW) factor in LCCA is used to convert:
- A single future lump sum to present value
- A series of equal annual costs to a present value equivalent (Correct answer)
- Present costs to future annual equivalents
- Variable costs to a uniform annual series
Correct answer: A series of equal annual costs to a present value equivalent
The UPW factor (also called the Present Worth of Annuity factor) converts a recurring uniform annual cost stream to a single present value.
Question 7: A project has two alternatives: Alternative A with a lower first cost but higher annual maintenance, and Alternative B with a higher first cost but lower annual maintenance. The BEST method to select the economical choice is:
- Select Alternative A because it has the lower initial cost
- Select Alternative B because lower maintenance is always preferred
- Calculate and compare the Life Cycle Cost of both alternatives at a common discount rate (Correct answer)
- Select the alternative with the lower annual maintenance cost
Correct answer: Calculate and compare the Life Cycle Cost of both alternatives at a common discount rate
LCCA compares total costs over the same study period using a common discount rate, which is the only method that accounts for both initial and recurring costs fairly.
CCE Life Cycle Costing & Total Cost of Ownership 1
Which ASTM standard is the primary guide for Life Cycle Cost Analysis (LCCA) of buildings and building systems?