What is life cycle cost and why is it used?

• A. Only initial purchase price
• B. Total cost of ownership over a product's life, including purchase, operation, maintenance, and disposal; used to compare options holistically
• C. Only disposal costs
• D. Only maintenance costs

Answer: (B)

Life cycle cost is the total cost of owning and operating a product or system over its entire life, from purchase to disposal. It includes the purchase price, installation, energy and other operating costs, routine maintenance and repairs, downtime, any training or service agreements, and end-of-life disposal or salvage value. This broad view is used because the cheapest option upfront isn’t always the cheapest over the long run—every choice has different operating costs and end-of-life implications. By evaluating all these costs together, you can compare options on true value over the period you care about, often considering the time value of money through discounting. In energy projects, for example, a higher upfront cost that saves energy can still yield the lowest total cost over time. The other approaches focus only on a single facet—initial price, disposal costs, or maintenance—so they miss how energy use, reliability, and end-of-life costs shape the real value of a solution.