Life Cycle Costs

Whole life cycle cost plans.

We can prepare detailed whole life cost plans to aid selection of the most suitable products, following pareto analysis of the project we compare relative products, life cycle costs will be based on. The following formula considers the main factors to consider. Including the energy cost.

Life Cycle Costs = [Years x (ExHrs+B+Rp+M+F+X)] + (C+D+En)

Note each factor should be multiplied by an inflation element which will be different for each element (not shown for simplicity).

Factor		Factual / Estimated	Description
E	Annual	Estimated	Energy cost multiplied by hours used
R	Annual	Estimated	Reliability cost
B	Annual	Estimated	Business interruption cost
Rp	Annual	Estimated	Repair cost
M	Annual	Estimated	Maintenance cost
C	Initial	Fact	Capital cost
D	Single cost	Estimated	Disposal cost
En	Single cost	Estimated	Environment cost
F	Annual	Fact	Cost to finance
X	Annual	Estimated	Unknown factor

E	Calculated from the energy consumption table below, then multiplied by the number of years, with an annual increase factor
R	Calculated as 10% of the capital cost C, divided by the number of years, then multiplied by the number of years, with an annual increase factor
B	A cost which the user might define financially, what they would loose if the system failed
Rp	Repair cost, a sinking fund representing 2% per annum of the Capital cost C, then multiplied by the number of years, with an annual increase factor
M	The cost of maintaining the asset per annum, in addition to Rp, then multiplied by the number of years, with an annual increase factor
C	Initial unit capital cost including installation, multiplied by the quantity of units
D	disposal cost today at 5% of initial capital cost C, factored for future cost by the % increase and the number of years
En	Environmental cost today, factored for future cost by the % increase and the number of years
F	Simple calculation of interest on the capital over the term
X	For future risk of owning the asset

The purpose of undertaking the above calculation is to theoretically appraise one product to another and aid the selection process. The purpose of the factors is to give a comparative measure against the features of two different products.

UK Estimating Support > Life Cycle Costs