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Sir, Why is oppurtunity cost not added while calculating cost of a product in life cycle costing??
Thank you
RachnaOpportunity costs are relevant when we are needing to make a decision regarding (for example) a new contract, when doing the contract will lose us existing revenue.
Lifecycle costing is different in that we are looking at a new product in isolation and estimating the long-term costs just of this new product for the purpose of deciding on what the selling price needs to be to ensure long-term profitability of the product.
There are situations in real-life where there can be an argument for including opportunity costs. However as far as the exam is concerned, the examiner has made it clear that we should ignore any opportunity costs.
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