This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
Life cycle costing is an economic method for evaluating assets that takes into consideration all costs arising from owning, operating, maintaining, and disposing of the asset. Life cycle costing recognize as opportunity for improvement in performance of the environmental because life cycle costing is a method that determine the environmental impacts associated with the life cycle of a material or product in a particular application. All cycle costing includes procurement and production costing technique. The purpose in procurement is to ensure the lowest cost of ownership of a fixed asset during the asset's economic life. Ownerships of a fixed asset such as maintenance, operation, installation, purchase price, disposal and other costs. The purpose in manufacturing during the products estimated life cycle durations is to estimate the production costs and how much revenue a product may generated and expenses occur in the each level of the value chain.
We used life cycle costing in conceptual stage, acquisition stage and the in-service stage. In conceptual stage is considered when the initial proposals for investment are being and the acquisition stage is when tenders for the supply of facilities, equipments or software are being. In-service stage is made a decision about whether to improve, disposal or maintain the assets.
The four major advantaged of life cycle costing analysis are improved awareness of total costs, evaluation of competing options in purchasing, performance trade-off against cost, more accurate forecasting of cost profiles. Fundamental concepts are common to all applications of life cycle costing is cost breakdown structure, cost estimate, discounting and inflation.
Life cycle procedures
Life cycle costing is inconsistent with the generally accepted accounting principles, so it is cannot apply in the financial reporting. Nevertheless, life cycle costing is useful form of costing from a planning position. Moreover product managers are always used life cycle costing into entire life cycle of product.
Managers can adjust and design the cost where they calculated the total cost per unit because throughout the process can assists managers obtain an actual view of the total cost per unit. Therefore, the efficiency way to use the life cycle costing is calculated the cost from the beginning idea for the product until the product is no long produced. Cost after calculated, divided by the total number of expected units to be sold throughout the lifetime of the product to come to a total cost per unit.
This is the case studies of the life cycle costing on corrosion remedial measures for concrete bridges and marine structures, which are subjected to ingress of sodium chloride from sea water or carbonation and other sources. The analysis of the results showed that life cycle costing is ability to assisting transportation agencies or engineers to evaluate optimum maintenance decisions in corrosion-related problems.
The cost elements used in life cycle costing for corrosion remedial case studies is initial cost, disposal cost, discount rate, maintenance cost, analysis period and the inflation rate.
Initial cost is made up of a number of cost elements which will not occur again after the activity is initiated. For instance surface preparation. The analysis period in the case studies is taking 75 to 100 years for bridges.
The relationship between various cost elements is shown in a typical expenditure stream diagram for life cycle costing. (Figure 1). The disposal cost is ignoring in this project because its remoteness from the life cycle costing, therefore tends to be small after discounting. The input data are obtained from three case studies:
Case Study I
Chosen a preventive option in bridges which involves: coating, silane, cathodic protection, waterproofing membranes, painting.
Case Study II
Choose repair and maintenance techniques in a wharf structure which include chloride extraction, cathodic protection and patch repair.
Case Study III
Choose anode systems in impressed-current cathodic protection for concrete bridges.
The input data for the three case studies are summarized in Table 1, 2, and 3.
Table 1 Input data for analysis in Case Study I
Corrosion preventive techniques
Analysis period: 75 years Base year: 2003
Real discount rate: 3.2 % Inflation rate: 2.3%
Alternatives Costs (US Dollars, $)
Painting Initial repair cost = $448,000
On-going cost = $45,000 (repeat at 10 years)
Waterproofing membranes Initial repair cost = $450,000
On-going cost = $43,000 (repeat at 25 years)
Coating Initial repair cost = $443,000
On-going cost = $40,000 (repeat at 25 years)
Silane Initial repair cost = $440,000
On-going cost = $36,000 (repeat at 10 years)
Cathodic protection Initial repair cost = $1,100,000
On-going cost = $240,000 (repeat at 8 years)
Table 2 Input data for analysis in Case Study II
Corrosion repair/stopping techniques
Analysis period : 20 years Base year : 1990
Real discount rate : 14 % Inflation rate : 10 %
Alternatives Costs (US Dollars, $)
Patch repair Initial repair cost = $ 280,000
On-going cost = $ 280,000 (repeat at 5 years)
Cathodic protection Initial repair cost = $ 474,000
On-going cost = $ 17,700 (repeat at 5 years)
Chloride extraction Initial repair cost = $ 306,000
On-going cost = $ 58,000 (repeat at 10 years)
Table 3 Input data for analysis in Case Study III
Analysis period : 75 years Base year : 2002
Real discount rate : 3.2 % Inflation rate : 2.2%
Alternatives Costs (US Dollars, $)
Catalyzed Ti-Mesh Initial repair cost = $ 155,000
On-going cost = $ 7,800 (repeat at 75 years)
Conductive paints Initial repair cost = $ 235,000
On-going cost = $ 11,800 (repeat at 14 years)
Thermal-sprayed Zn-coating Initial repair cost = $ 220,000
On-going cost = $ 10,000 (repeat at 27 years)
Thermal-sprayed Ti-coating Initial repair cost = $ 279,000
On-going cost = $ 13,800 (repeat at 30 years)
Table 4, 5, 6 is the result of life cycle costing reflect by the case studies I, II, III.
Life cycle costs by life cycle periods are shown in Figures 3, 5, and 7.
Figures 2, 4, and 6 show the cumulative life cycle costs, in net present value, for the competing alternatives in case I, case II and case III.
Table 4 Life-cycle costs for case study I
From the case study I (Table 4), the most cost-effective preventive technique among the alternatives is the coating that is $461,000. The most expensive used for prevention of corrosion is cathodic protection because of the high initial and maintenance costs.(Figures 3). The cost of coating and waterproofing membranes are lower than cathodic prevention, painting and silane because coating and waterproofing have longer frequency years for periodic maintenance and cathodic prevention, painting and silane only have shorter frequency years for periodic maintenance.(Figure 2).
Figure 2 Cumulative life cycle costs, in present value, for each corrosion preventive techniques in Case Study I
Figure 3 Life cycle costs by life cycle periods for Case Study I
From the case study II, the most effective repairing technique of the chloride extraction is causes by it has the lowest life cycle cost over the analysis period. (Table 5). In figure 5 shows that the longer frequency year is chloride extraction. In contrary, patch repair need much expenses for periodic maintenance and causes it more costly if compare to Cathodic protection and Cathodic extraction.
Figure 4 Cumulative life cycle costs, in present value, for each corrosion maintenance techniques in Case Study II
Figure 5 Life cycle costs by life cycle periods for Case Study II
From the case study III, the most cost effective is catalysed Ti-mesh because of their initial cost are lower if compare to others. The reason of the catalysed has a lower cost is because the service life for the anodes is long and cause the periodic maintenance costs to be far away in the life cycle, therefore it incline to small after discounting the present value (Figure 7). So, we can see the effect on the life cycle costs is small in Figure 6.
Figure 6 Cumulative life cycle costs, in present value, for each anode used in impressed-current cathodic protection in Case Study III
Figure 7 Life cycle costs by life cycle periods for Case Study III
As a result, costing variables such as frequency years, initial costs analysis period and periodic maintenance costs will affect the life-cycle costing. If the analysis period and the frequency year are long, the impact of the periodic maintenance costs on the life-cycle costing will be smallã€‚
In this case of studies, it demonstrated the useful application of life cycle costing as a decision support tool in analyzing investment decision making of repairing corrosion induced damage and determining optimum maintenance strategies for concrete bridges and wharf structures
Life cycle costing is a useful tool to assists transportation agency or engineers in the problem of the corrosion problem and assesses the optimum maintenance decision. Life cycle costing useful in select the most effective corrosion remedial. In the case studies, we can see that the cost variable such as frequency years, periodic maintenance cost, and initial cost will affect the life cycle costing. Moreover, the case studies also illustrates that the initial cost is not the only standard form the choosing the remedial measures.
Frequency years and periodic maintenance costs should be consideration by discounting to the net present value in the life-cycle costing. As a conclusion, consider only the expenditures of the agency is not a great practice to the life cycle costing, life cycle costing should consider the sensitivity analysis and user cost throughout the service life of a remedial measure