Life Cycle Costing (LCC)
Categories: Company Management
Life Cycle Costing (LCC) looks at the overall cost of an asset, from beginning to end. If our manufacturing company is trying to figure out whether to buy a new piece of heavy equipment, we can conduct a Life Cycle Cost Analysis (LCCA) that includes the equipment’s purchase price, any taxes or fees, maintenance costs, training costs, repairs, upgrades, and eventual disposal costs. Then we can compare those numbers to data we’ve compiled about, say, renting the equipment instead, or either buying a cheaper or more expensive version. This allows us to try and estimate which option would be the most cost-effective in the long run.
If our tech company is trying to figure out how much it’s going to cost us to develop that sweet new VR gear we’ve been dreaming about, our LCC might take into account things like research and development, licensing fees, prototype testing, marketing, and manufacturing.