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CMA Final · Strategic Cost Management · Asset Life Cycle Costing

Which one of the following is treated as a part of the acquisition (pre-ownership) phase in asset life cycle costing, as opposed to the operation and maintenance phase?

Installation and commissioning cost belongs to the acquisition phase because it is incurred once, before the asset starts producing. Maintenance fees, power consumption and recurring operator training arise during the operating life, so they are ownership or operating costs, not acquisition costs.

  1. AAnnual preventive maintenance contract fee
  2. BCost of installation and commissioning of the machineCorrect
  3. CPower consumed during production runs
  4. DCost of operator training repeated every year

Explanation

Asset life cycle costing divides cost into acquisition costs (purchase, installation, commissioning, initial training) and ownership/operating costs (energy, maintenance, recurring training). Installation and commissioning are incurred once before use, so they belong to acquisition. The other three recur during operation.

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