What does life cycle costing take into account for an asset?

Life cycle costing is a financial evaluation technique that considers all costs associated with an asset over its entire life span. This includes not only the initial purchase price but also other costs that may impact the overall value of the asset throughout its usage. By accounting for the resale value, life cycle costing provides a more comprehensive view of the true cost of ownership. This method enables municipalities to make informed decisions that consider long-term financial impacts rather than just initial outlays.

In this context, while maintenance expenses, insurance costs, and employee training are relevant costs when managing an asset, they typically fall under different financial analyses or considerations rather than being the primary focus of life cycle costing. Thus, the emphasis on both the initial purchase price along with the anticipated resale value reflects the broader economic considerations that underpin life cycle costing.