The paper 'Life Cycle Costing' is a great example of a Finance and Accounting Assignment. This report undertakes to carry out a lifecycle costing calculation of a 7-seater motor vehicle for family use. The report will use the method of determining the initial costs incurred in the purchase of the motor vehicle and subject this price to other calculations such as the Net Present Value, depreciation, and discount rates. Essentially, this report seeks to conduct an evaluation based on a set of assumptions that shall be outlined below. The data presented here takes into consideration all the necessary LCC tabulations and further describes the data used in the calculation and sourcing of the data. INTRODUCTION. The use of the LCC technique has been done extensively in the estimation of the ownership costs.
This technique serves particular importance especially in quantifying the costs of assets. Further, Life cycle costing aids in the decision-making process whereby it provides the breakdown structure of projects and identifies the various sources of the data sources as well as the probable uncertainties that may arise with the use of the data (Domansky, 2006).
In this particular case of the motor vehicle, the assessment shall involve the consideration of the various costs such as the initial, ownership, and operating costs. The initial cost is basically the cost incurred in the purchase of the motor vehicle. Similarly, the ownership cost involves the costs incurred in the maintenance of the vehicle. This is going to involve the cost of replacing car parts such as tires and the costs incurred in conducting car service. Additionally, operating costs involve the costs incurred on the motor vehicle on operations such as transport.
This, therefore, involves the projection of fuel costs, parking fees, and insurance costs. In addition to this, these costs also embark on determining the appropriate costs on disposal. This report is highly dependent on the use of Net Present Value in the lifecycle costing. Moreover, it takes consideration of market factors such as inflation and also includes depreciation (Pandey, 2010). However, taxation is not included in determining the total amount spent in six years. ASSUMPTIONS AND DATA SOURCES In the calculation of the Net Present Value, several assumptions have to be made in order to arrive at relatively conclusive information.
The vehicle used for this report is a 7-seater Nissan Pathfinder. The assumptions made in the calculation of the vehicle are that: The car operates on average 25,000km per annum The car does not experience any damage or crash during its useful life Throughout its useful life (for the next six years), the car is kept in good shape through regular servicing. Further, the major assumptions in carrying out analysis of the data in the valuation of the vehicle are that the charges incurred on the motor vehicle remain consistent over the 6 year period.
Further, governmental policies should equally remain the same throughout this period. While this is practically impossible, this assumption aids in ensuring a predictable pattern throughout the 6 year period, therefore making it possible to predict and tabulate outcomes.
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