Life Cycle Costing is defined as:

Life Cycle Costing is defined as:

• A. The total cost of ownership over the life span of the asset
• B. The initial cost only
• C. The annual operating cost
• D. The salvage value

Answer: (A)

Life Cycle Costing looks at all costs tied to owning and using an asset over its entire life, not just the purchase price. It includes the initial acquisition cost and all costs that follow—installation, financing, operating expenses (like energy or fuel), maintenance and repairs, downtime, consumables, training, taxes, and insurance, plus eventual disposal or salvage value. Because it accounts for everything incurred from start to end, it lets you compare options by total financial impact over the asset’s life, rather than by a single cost component. That’s why the best description is the total cost of ownership over the life span of the asset. The other options focus on only a portion of costs—initial cost, annual operating cost, or salvage value—and miss the broader, long-term picture. When you’re choosing between alternatives, life-cycle costing helps ensure you select the option with the lowest overall cost of ownership.

Life Cycle Costing looks at all costs tied to owning and using an asset over its entire life, not just the purchase price. It includes the initial acquisition cost and all costs that follow—installation, financing, operating expenses (like energy or fuel), maintenance and repairs, downtime, consumables, training, taxes, and insurance, plus eventual disposal or salvage value. Because it accounts for everything incurred from start to end, it lets you compare options by total financial impact over the asset’s life, rather than by a single cost component.

That’s why the best description is the total cost of ownership over the life span of the asset. The other options focus on only a portion of costs—initial cost, annual operating cost, or salvage value—and miss the broader, long-term picture. When you’re choosing between alternatives, life-cycle costing helps ensure you select the option with the lowest overall cost of ownership.