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Life cycle costing

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 5 years ago by AvatarJohn Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • February 9, 2021 at 7:28 pm #609863
    Avatarkennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    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 avoided

    I 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 #609892
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54838
    • ☆☆☆☆☆

    Shortening 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 #609902
    Avatarkennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    from 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 #609911
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54838
    • ☆☆☆☆☆

    It 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 #609928
    Avatarkennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    Understood.Dear Tutor I will come to relevant cost example either.

    February 10, 2021 at 2:44 pm #609936
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54838
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • The topic ‘Life cycle costing’ is closed to new replies.

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