Certified Professional Public Buyer (CPPB) Practice Test

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What is the primary purpose of a life cycle cost analysis?

To determine initial purchase cost
To evaluate the total cost over time
To assess supplier pricing trends
To calculate maintenance costs only

The correct answer is: To evaluate the total cost over time

The primary purpose of a life cycle cost analysis is to evaluate the total cost over time associated with a product, service, or system. This comprehensive assessment includes not just the initial purchase price but also the costs incurred throughout its entire life span, such as operational costs, maintenance expenses, and disposal costs. By analyzing all these factors, decision-makers can make informed choices that reflect the true financial impact of their investments, allowing for better budgeting and resource allocation. Focusing solely on initial purchase cost neglects significant long-term expenses, which can lead to misleading financial assessments. Similarly, while understanding supplier pricing trends can inform purchasing decisions, it does not encompass the broader scope of a life cycle analysis, which aims to provide a holistic view of costs. Lastly, limiting the assessment to maintenance costs ignores other potential expenditures that may arise throughout the lifecycle of the asset, further emphasizing the importance of a complete evaluation of total costs over time.