Cost behaviour in the product lifecycle

This topic has 3 replies, 2 voices, and was last updated 11 months ago by mrjonbain.

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June 30, 2025 at 3:15 pm #718081
menpagalhoon
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Why are no variable costs incurred during planning and design stage? Is it because no units are being produced yet?

Why is decommissioning factories a fixed cost? Should not it depend on the number of factories or industrial complexes?

What is the concept of service cost at the time of abandonment? Please give an example.
July 3, 2025 at 2:41 pm #718142
mrjonbain
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For the first question the answer is yes. It’s because no Labour, material or other direct expenses are being incurred as no units are being produced.
July 3, 2025 at 2:46 pm #718143
mrjonbain
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For the second question- Decommissioning factories is a fixed cost per asset because it represents a one-time expense to retire a specific facility. If multiple factories are being decommissioned it is variable with respect to the number of assets but not to the number of units.
July 3, 2025 at 3:10 pm #718145
mrjonbain
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To the third question- these are costs brought about by ending a project or service. An airline cancelling flights may have to provide alternative transport and/or hotel rooms to impacted passengers.
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