CEM Equipment Lifecycle & Procurement Flashcards

What is 'economic life' in the context of equipment management?

Answer: The period during which it is most cost-effective to keep and operate equipment

Economic life is the period that minimizes the average total cost per unit of service, after which replacement becomes more cost-effective than continued operation.

Which document formalizes the terms, conditions, and responsibilities between a buyer and equipment vendor?

Answer: Purchase order or contract

A purchase order or formal contract legally defines the obligations of both buyer and seller including price, delivery, warranty, and acceptance criteria.

What is the purpose of incoming inspection when newly purchased equipment is delivered?

Answer: To verify the equipment meets specifications and is undamaged before acceptance

Incoming inspection ensures the delivered equipment matches the specifications and contract terms before the organization formally accepts ownership.

In lifecycle costing, which term refers to costs that occur whether or not equipment is used?

Answer: Fixed costs

Fixed costs such as insurance, storage, and depreciation accrue regardless of equipment utilization and must be factored into lifecycle cost models.

What is a key advantage of cooperative or group purchasing in equipment procurement?

Answer: Achieves lower unit costs through combined buying volume

Cooperative purchasing pools the buying power of multiple organizations to negotiate lower prices and better terms from vendors.

Which analysis technique helps determine the optimal time to replace aging equipment by plotting ownership costs over time?

Answer: Minimum cost replacement analysis

Minimum cost replacement analysis plots declining ownership costs (amortized capital) against rising operating costs to find the year when total average annual cost is lowest.