Cost Reduction Method And Life Cycle Procedures Accounting Essay

Life rhythm costing is an economic method for measuring assets that takes into consideration all costs originating from having, runing, keeping, and disposing of the plus. Life rhythm bing recognize as chance for betterment in public presentation of the environmental because life rhythm costing is a method that determine the environmental impacts associated with the life rhythm of a stuff or merchandise in a peculiar application. All rhythm bing includes procurance and production costing technique. The intent in procurance is to guarantee the lowest cost of ownership of a fixed plus during the plus ‘s economic life. Ownerships of a fixed plus such as care, operation, installing, purchase monetary value, disposal and other costs. The intent in fabricating during the merchandises estimated life rhythm continuances is to gauge the production costs and how much gross a merchandise may bring forth and disbursals occur in the each degree of the value concatenation.

We used life rhythm bing in conceptual phase, acquisition phase and the in-service phase. In conceptual phase is considered when the initial proposals for investing are being and the acquisition phase is when stamps for the supply of installations, equipments or package are being. In-service phase is made a determination about whether to better, disposal or keep the assets.

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The four major advantaged of life rhythm bing analysis are improved consciousness of entire costs, rating of viing options in buying, public presentation tradeoff against cost, more accurate prediction of cost profiles. Cardinal constructs are common to all applications of life rhythm costing is cost breakdown construction, cost estimation, discounting and rising prices.

Life rhythm processs

Life rhythm costing is inconsistent with the by and large accepted accounting rules, so it is can non use in the fiscal coverage. Nevertheless, life rhythm costing is utile signifier of bing from a planning place. Furthermore merchandise directors are ever used life rhythm bing into full life rhythm of merchandise.

Directors can set and plan the cost where they calculated the entire cost per unit because throughout the procedure can help directors obtain an existent position of the entire cost per unit. Therefore, the efficiency manner to utilize the life rhythm costing is calculated the cost from the beginning thought for the merchandise until the merchandise is no long produced. Cost after calculated, divided by the entire figure of expected units to be sold throughout the life-time of the merchandise to come to a entire cost per unit.

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Case surveies

This is the instance surveies of the life rhythm bing on corrosion remedial steps for concrete Bridgess and marine constructions, which are subjected to ingress of Na chloride from sea H2O or carbonation and other beginnings. The analysis of the consequences showed that life rhythm costing is ability to helping transit bureaus or applied scientists to measure optimal care determinations in corrosion-related jobs.

The cost elements used in life rhythm bing for corrosion remedial instance surveies is initial cost, disposal cost, price reduction rate, care cost, analysis period and the rising prices rate.

Initial cost is made up of a figure of cost elements which will non happen once more after the activity is initiated. For case surface readying. The analysis period in the instance surveies is taking 75 to 100 old ages for Bridgess.

The relationship between assorted cost elements is shown in a typical outgo watercourse diagram for life rhythm bing. ( Figure 1 ) . The disposal cost is disregarding in this undertaking because its farness from the life rhythm costing, hence tends to be little after dismissing. The input informations are obtained from three instance surveies:

Case Study I

Chosen a preventative option in Bridgess which involves: coating, silane, cathodic protection, waterproofing membranes, picture.

Case Study II

Choose fix and care techniques in a pier construction which include chloride extraction, cathodic protection and spot fix.

Case Study III

Choose anode systems in impressed-current cathodic protection for concrete Bridgess.

The input informations for the three instance surveies are summarized in Table 1, 2, and 3.

Table 1 Input informations for analysis in Case Study I

Corrosion preventative techniques

Analysis period: 75 old ages Basal twelvemonth: 2003

Real price reduction rate: 3.2 % Inflation rate: 2.3 %

Options Costss ( US Dollars, $ )

Painting Initial fix cost = $ 448,000

Ongoing cost = $ 45,000 ( repetition at 10 old ages )

Waterproofing membranes Initial fix cost = $ 450,000

Ongoing cost = $ 43,000 ( repetition at 25 old ages )

Coating Initial fix cost = $ 443,000

Ongoing cost = $ 40,000 ( repetition at 25 old ages )

Silane Initial fix cost = $ 440,000

Ongoing cost = $ 36,000 ( repetition at 10 old ages )

Cathodic protection Initial fix cost = $ 1,100,000

Ongoing cost = $ 240,000 ( repetition at 8 old ages )

Table 2 Input informations for analysis in Case Study II

Corrosion repair/stopping techniques

Analysis period: 20 old ages Basal twelvemonth: 1990

Real price reduction rate: 14 % Inflation rate: 10 %

Options Costss ( US Dollars, $ )

Patch fix Initial fix cost = $ 280,000

Ongoing cost = $ 280,000 ( repetition at 5 old ages )

Cathodic protection Initial fix cost = $ 474,000

Ongoing cost = $ 17,700 ( repetition at 5 old ages )

Chloride extraction Initial fix cost = $ 306,000

Ongoing cost = $ 58,000 ( repetition at 10 old ages )

Table 3 Input informations for analysis in Case Study III

Anode systems

Analysis period: 75 old ages Basal twelvemonth: 2002

Real price reduction rate: 3.2 % Inflation rate: 2.2 %

Options Costss ( US Dollars, $ )

Catalyzed Ti-Mesh Initial fix cost = $ 155,000

Ongoing cost = $ 7,800 ( repetition at 75 old ages )

Conductive pigments Initial fix cost = $ 235,000

Ongoing cost = $ 11,800 ( repetition at 14 old ages )

Thermal-sprayed Zn-coating Initial fix cost = $ 220,000

Ongoing cost = $ 10,000 ( repetition at 27 old ages )

Thermal-sprayed Ti-coating Initial fix cost = $ 279,000

Ongoing cost = $ 13,800 ( repetition at 30 old ages )


Table 4, 5, 6 is the consequence of life rhythm bing reflect by the instance surveies I, II, III.

Life rhythm costs by life rhythm periods are shown in Figures 3, 5, and 7.

Figures 2, 4, and 6 show the cumulative life rhythm costs, in net present value, for the viing options in instance I, instance II and instance III.

Table 4 Life-cycle costs for instance survey I

Economic Evaluation

From the instance survey I ( Table 4 ) , the most cost-efficient preventative technique among the options is the coating that is $ 461,000. The most expensive used for bar of corrosion is cathodic protection because of the high initial and care costs. ( Figures 3 ) . The cost of surfacing and waterproofing membranes are lower than cathodic bar, picture and silane because coating and waterproofing have longer frequence old ages for periodic care and cathodic bar, picture and silane merely have shorter frequence old ages for periodic care. ( Figure 2 ) .

Figure 2 Accumulative life rhythm costs, in present value, for each corrosion preventative techniques in Case Study I

Figure 3 Life rhythm costs by life rhythm periods for Case Study I

From the instance survey II, the most effectual repairing technique of the chloride extraction is causes by it has the lowest life rhythm cost over the analysis period. ( Table 5 ) . In figure 5 shows that the longer frequence twelvemonth is chloride extraction. In contrary, patch fix need much disbursals for periodic care and causes it more dearly-won if compare to Cathodic protection and Cathodic extraction.

Figure 4 Accumulative life rhythm costs, in present value, for each corrosion care techniques in Case Study II

Figure 5 Life rhythm costs by life rhythm periods for Case Study II

From the instance survey III, the most cost effectual is catalysed Ti-mesh because of their initial cost are lower if comparison to others. The ground of the catalysed has a lower cost is because the service life for the anodes is long and do the periodic care costs to be far off in the life rhythm, therefore it incline to little after dismissing the present value ( Figure 7 ) . So, we can see the consequence on the life rhythm costs is little in Figure 6.

Figure 6 Accumulative life rhythm costs, in present value, for each anode used in impressed-current cathodic protection in Case Study III

Figure 7 Life rhythm costs by life rhythm periods for Case Study III

Costing Variable

As a consequence, bing variables such as frequence old ages, initial costs analysis period and periodic care costs will impact the life-cycle costing. If the analysis period and the frequence twelvemonth are long, the impact of the periodic care costs on the life-cycle costing will be little & A ; atilde ; ˆ‚


In this instance of surveies, it demonstrated the utile application of life rhythm bing as a determination support tool in analysing investing determination devising of mending corrosion induced harm and finding optimal care schemes for concrete Bridgess and pier constructions

Life rhythm costing is a utile tool to aids transit bureau or applied scientists in the job of the corrosion job and assesses the optimal care determination. Life rhythm bing utile in select the most effectual corrosion remedial. In the instance surveies, we can see that the cost variable such as frequence old ages, periodic care cost, and initial cost will impact the life rhythm bing. Furthermore, the instance surveies besides illustrates that the initial cost is non the lone criterion signifier the taking the remedial steps.

Frequency old ages and periodic care costs should be consideration by dismissing to the net present value in the life-cycle costing. As a decision, see merely the outgos of the bureau is non a great pattern to the life rhythm costing, life rhythm costing should see the sensitiveness analysis and user cost throughout the service life of a remedial step


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