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Life-cycle costing

Life-cycle costing considers costs and revenues across the relevant life of a product or service rather than only its manufacturing period. It can include research, design, launch, production, support and disposal obligations. Many later costs are influenced by early design choices, so whole-life information supports pricing and development decisions. Estimates are uncertain, especially for long-lived products, and the reporting boundary should be clear. It differs from the marketing description of sales stages.

Worked example

Development $200,000 plus production $600,000 and support $100,000 gives $900,000 life-cycle cost. Expected revenue $1.1 million leaves $200,000 before any omitted or discounted effects.

Common mistake

Do not call a product profitable merely because its manufacturing margin is positive while ignoring development, support or end-of-life costs.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA APM Direct September 2026–June 2027
ACCA MA Direct September 2026–June 2027
ACCA PM Direct September 2026–June 2027
FIA FMA Direct September 2026–June 2027