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Life Cycle Costing: Definition, Process and Purpose

What Is Life Cycle Costing?

How to Use Life Cycle Costing?

What Is the Process of Life Cycle Costing?

What Is the Purpose of Life Cycle Costing?

Example of Life Cycle Costing

Let's have a look at the following example to gain a better understanding of how life cycle costing works out for products in a business. 

Let's say you are planning to buy a new computer for your business which you will be using for 5 years.  The associated costs are:

Purchasing Cost


Operating Cost

₹10,000 for paying its electricity bill throughout its lifetime.

Repair and Maintenance Cost



₹5000 for 5 years

Disposal cost




Even though the computer will initially cost you ₹50,000, the computer will cost your business a total of over ₹67,500 for 5 years. 

When you are operating a business, keeping track of all the expenses and revenues is essential to ensure profitability. In this article, we have discussed what is life cycle costing and how life cycle costing can prove to be more beneficial than conventional costing methods.

FAQs about Life Cycle Costing