ACCA F5 Life cycle costing Lecture 1
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Well explained lecture John. Thanks.
Could you please explain more on ‘design costs out of products’ ?
It means change the design in order to reduce the costs.
(Are you watching the lectures in order, because I do mention this in the lecture on target costing)
At what stage is cost the greatest?
It depends on the product and on the level of production. In the early stages the development costs will be high but the total production cost will be low. In the growth and maturity stages the development costs will disappear but the total production costs will be higher.
It is of no direct relevance anyway.
Thanks John. When making decisions or assessing the overall profitability of the product, it is preferable to look at the whole product lifecycle taking into consideration the average lifecycle cost of the product.
Correct. It is quite likely that products will be loss-making in the early years (because of development costs etc.) unless they charged a stupidly high price (and risk not selling any!), and so it is more sensible to look at the lifecycle cost when making decisions and be prepared to lose money in the early years.
Exactly so
As always, great lectures BUT the volume is killing me. its really a strain to hear what you are saying at times. i don’t know if its the new way you’re recording the lectures with video or what. but I’ve never had this problem before with your older lectures. heartbreaking honestly.
If you have a problem with the volume, then ask in the support page. The link is above 馃檪
Sir you said that in maturity phase, the sales are maximum but I have checked from other sources sales in maturity period start to decline due to competition e.t.c
Maturity is when sales reach a maximum, then they start to decline.
(The definition of mature is “fully grown; grown to full size” !!)
So they start declining in maturity phase or in declining phase?????
hi john, could you please explain the meaning of this statement .
” If costings (and decisions based on the costings) were only to be ever done over the short term it could easily lead to bad decisions”
thanks in advance
It is quite likely that in the early years of a new product, then the cost per unit would be very high (because of all the development and advertising costs). If decisions were based on this short-term cost then either they would charge such a high price that maybe they would not sell anything, or maybe they would just decide not to produce the new product at all.