Final answer:
Whole Life Cycle Costing is the process of considering and evaluating all the costs associated with an asset throughout its entire life cycle. It is important because it allows businesses to make informed decisions about investments by taking into account the costs of operation, maintenance, and disposal. By performing a whole life cycle costing analysis, companies can determine which assets will be more cost-effective in the long run.
Step-by-step explanation:
Whole Life Cycle Costing is the process of considering and evaluating all the costs associated with an asset throughout its entire life cycle, from acquisition to disposal.
It is important because it allows businesses to make informed decisions about investments by taking into account not only the initial cost of the asset but also the costs of operation, maintenance, and disposal.
For example, let's consider a manufacturing company that is deciding between two machines for their production line. Machine A has a lower upfront cost, but higher maintenance costs and a shorter lifespan. Machine B has a higher upfront cost but lower maintenance costs and a longer lifespan. By performing a whole life cycle costing analysis, the company can determine which machine will be more cost-effective in the long run, considering all the associated costs.