Certified Professional Public Buyer (CPPB) Practice Test

Which of the following is not a component of life cycle cost?

1. Depreciation cost

2. Initial acquisition cost

3. Operational expenses

4. Marketing costs

The correct answer is: Marketing costs

Life cycle cost refers to the total cost of ownership over the life of an asset. This concept includes all costs associated with the asset from its initial acquisition through its operational life and ultimately to its disposal. When considering the components of life cycle cost, depreciation cost represents the reduction in value of an asset over time, reflecting its wear and tear. Initial acquisition cost encompasses all expenses related to purchasing the asset, including procurement and installation. Operational expenses cover the costs incurred during the asset’s use, such as maintenance, utilities, and staff salaries attributable to the asset. Marketing costs, however, do not typically fall under life cycle cost. While they might be relevant to the broader business context or specific projects, they are not directly tied to the ownership and maintenance of an asset itself. This distinction is important in managing resources and planning expenditures effectively, making marketing costs unrelated to the life cycle costing framework.