The Four Major Advantaged Of Life Cycle Costing Analysis Accounting Essay

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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.

Case studies

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 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


Economic Evaluation

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)

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.

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.

Costing Variable

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 small。


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