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Hello,
I have a question in relation with Life Cycle costing. I hope you could clarify something. The question is 13.3 BBP Revision Kit>
Which of the following statements descibes life cycle costing?
I am not sure about the following two options>
B. the profiling of cost over a product’s development, prodcution life and dismantling period.
C. the profiling of cost and revenues over a prodcut’s developement, prodcution life and dismantling period.I would say that option C is the correct one, but in the book it seems that the correct answer is B (they say that life cycle costing looks at cost only but over the prodcut’s life cycle)
And my question is… what about revenues? the definition of life cycle costing in the BPP book says that it tracks and accumulates the costs and revenues attributable to the product over the full life cycle, which may last for many years.
Could you please help me with this?
Thank you very much in advanceTricky question but, life cycle costing is … a costing technique. Follow the key term in book.
Maybe also the trick is in word “development” when the company does not have any revenues.
I guess what you got wrong is the essence of lifecycle costing (and maybe other costing techniques). What is core about all costing techniques is that they are all about costing – how to control and manage your costs to get required profit. And what thay want from you is to understand that in f2 and f5 we are only talking about cost managing and cost accounting – ways to define cost drivers, control them and account. Revenue is not what you can control using these techniques.
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