Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Life cycle costing
- This topic has 5 replies, 2 voices, and was last updated 4 years ago by
John Moffat.
- AuthorPosts
- February 9, 2021 at 7:28 pm #609863
Hi dear Tutor I took all of the following questions from Kaplan
Question first
Which of the following are said to be benefits of life cycle costing?
1) It provides the true financial cost of a product
2) The length of the lifecycle can be shortened
3) Expensive errors can be avoided in that potentially failing products can be avoided
4) Lower costs can be achieved earlier by designing out costs
5) Better selling price can be set
6) Decline stages of the lifecycle can be avoidedI selected here 1,2.3.4.5 but in the answer shows 1,3,4, and why not 2-“shortening the length of a lifecycle is not desirable and decline (for most products) inevitable”
Second question
The following statements relate to the justification of the use of life cycle costing:1)Product life cycles are becoming increasingly short.This means that the iniitial costs are an increasingly important component in the product’s overall costs
2)Product costs are increasingly weiighted to the start of a product’s life cycle, and to properly understand the profitability of a product these costs must be matched to the ultimate revenues
3)The high costs of (for example) research, design and marketing in the early stages in a product’s life cycle necessitate a high initial selling price
4)Traditional capital budgeting techniques do not attempt to minimise the costs or maximise the revenues over the product life cycle
here i selected 1,3 and 4 which is correct
my question here is that if we compare two questions i see contradictory opinion between
2) The length of the lifecycle can be shortened which can not be considered benefit and 1)Product life cycles are becoming increasingly short.This means that the iniitial costs are an increasingly important component in the product’s overall costs-it has been given right option
February 10, 2021 at 9:35 am #609892Shortening the life cycle may well be a good idea, but using life-cycle costing does not mean that we can automatically shorten the life-cycle – maybe we can, maybe we can’t. We will consider it, but that doesn’t mean we can shorten it.
February 10, 2021 at 10:30 am #609902from benefit point of view it is not but from using point of view we can or can not
February 10, 2021 at 10:53 am #609911It may be something we decide to do, but it is not an automatic benefit of using life-cycle costing.
February 10, 2021 at 2:23 pm #609928Understood.Dear Tutor I will come to relevant cost example either.
February 10, 2021 at 2:44 pm #609936You are welcome 🙂
- AuthorPosts
- The topic ‘Life cycle costing’ is closed to new replies.