Learn how life-cycle costing helps building managers compare the total costs of boiler options, considering purchase price and operating expenses for informed decision-making.
Table of Contents
Question
A building manager is comparing the operating cost of the existing boiler to the purchase and operation of a new and more efficient boiler. The building manager discovers that although the upfront cost is significant, purchasing the new boiler would drastically decrease the cost of running and operating the system. This exercise is called
A. life-cycle costing
B. value engineering
C. integrated design
D. life-cycle assessment
Answer
A. life-cycle costing
Explanation
Life-cycle costing is an economic analysis method that considers all costs associated with an asset over its entire life cycle, from acquisition and installation to operation, maintenance, and disposal. In this case, the building manager is comparing the total costs of owning and operating two different boilers over their respective lifetimes.
Life-cycle costing is a method used to assess the total cost of ownership over the life of an asset, such as a boiler system. It takes into account all costs associated with the asset, including initial purchase, installation, operation, maintenance, and disposal.
In the given scenario, the building manager is comparing the cost of the existing boiler to the cost of purchasing and operating a new, more efficient boiler. Although the new boiler has a higher upfront cost, it would significantly reduce the cost of running and operating the system over its lifespan. This analysis, which considers both the initial investment and the long-term operating costs, is an example of life-cycle costing.
Life-cycle costing helps building managers and owners make informed decisions about investments in building systems and equipment. By considering the total cost of ownership, they can identify options that may have higher initial costs but result in lower overall costs due to improved efficiency, reduced maintenance, or longer lifespans.
The other options are incorrect because:
B. Value engineering is a systematic approach to improving the value of a product or service by examining its functions and costs, but it does not specifically address life-cycle costs.
C. Integrated design is a collaborative process that involves all stakeholders in the design of a building to optimize its performance, but it does not focus on comparing costs over an asset’s life-cycle.
D. Life-cycle assessment is a technique used to evaluate the environmental impacts of a product or service throughout its life-cycle, but it does not primarily focus on cost analysis.
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