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The book says life cycle costing shows the total profit achieved over the entire life of the product as it traces the cost and revenue attributable to each product over its entire product life.
My question: does that mean life cycle costing happens at the end of the product life? Because it compares with annual budget system which doesn’t see the whole picture and its not a representation of the cost and revenue at end of product life. Or does it start at planning process but rather than just seeing annual you see the whole product life, but that would mean the product life is estimated and revenue also estimated?
Please explain in detail to help me out.
(I have watched the lectures)
Thank you.
It is done on budgeted figures at the start of the project.
The main reason is to help decide on a sensible selling price – it is quite likely to result in a loss in the early years, but this is no problem if it results in profits later and a profit over the whole of the products life.
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