Life Cycle Cost Estimation Models: An Overview

The article focuses on the issue of estimating costs throughout a product’s life cycle. Based on information available in domestic and foreign literature, existing life cycle cost models are characterized, and their areas of application are indicated. Several criteria for classifying these models are proposed, and the importance of conducting analysis and evaluation of expenditures using the life cycle cost estimation method is demonstrated.1. INTRODUCTION
The concept of Life Cycle Costing (LCC) is based on the idea of the product life cycle, which was outlined in marketing. According to this, a product existing on the market goes through several phases of its life, and in each of these phases, costs characteristic of that stage of the product life cycle are incurred. It is the life cycle that provides the opportunity to capture and map cost changes at every stage of a product’s life on the market, from the product concept to its disposal – and thus it is a useful and practical instrument used in cost analysis.
The life cycle cost is determined according to an adopted model, adapted to the information needs of the users (recipients) of the information, and it serves as a basis for them to make appropriate decisions and actions.
The aim of the paper is to show the importance of life cycle-based cost accounting, as well as – based on the author’s current state of knowledge – a brief characterization of LCC methods and models.
2. THE CONCEPT OF LIFE CYCLE COST
According to PKN [1], the life cycle cost is the total cost incurred over the life cycle of a product, i.e., from the creation of the product concept to its disposal. B.S. Blanchard and W. Fabrycky [3] presented a more detailed definition of LCC. These authors state that the total life cycle cost of a product or system includes research and development costs, design and production costs, operation and maintenance costs, and product retirement and disposal costs. In the literature on the subject, the concept of product life cycle cost is defined in various ways. These contradictions relate primarily to the number of life cycle phases to be included in cost estimation. Estimation can cover the entire product life cycle, a single phase of this cycle, or a combination of different life cycle phases.
Experience shows that a large part of life cycle costs is a consequence of decisions made in the earlier (pre-production) phases of product development. (…)

Life Cycle Cost Estimation Models: An Overview – PDF file for download