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Dear Sir,
The following is a statement in mock exam
Life cycle costing can be applied to customers along with the products.
It is given as true
Can you pls explain what is the statement saying and why is it true?What it is saying is that suppose you were a new customer and I am wondering what price to charge you (I might, for example, give you a discount on the normal price if you were going to be a big customer).
What I might do is try and forecast how many you were likely to buy each year. In the early years you might not buy very many but provided I offer you a good price then you might buy a lot more in the future. So what I might do is forecast what you are likely to buy overall and use that to determine a price to charge you. It might mean I am making little or no profit from you in the early years because you are not buying a lot at the beginning, but it would be worth it to me if overall you were making a nice profit for me because you would buy a lot more in later years.
It would be hard to actually do this in real life (and I cannot imagine you would ever be asked to do it in the exam), but in principle it would be possible 🙂
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