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    Life Cycle Costing

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    Tasha Derahman
    This document discusses life cycle costing, which accumulates and manages costs over a product's life. It defines life cycle costing and explains its aims to estimate revenue and expenses at each stage. Key aspects covered include product costs, upstream/downstream costs, and managing costs through a life cycle perspective. The four stages of a product life cycle are discussed as planning/design, development, production, and distribution/support. Advantages include involvement of all costs and understanding cost factors, while disadvantages include difficulty estimating long-term costs.

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    Life Cycle Costing

    Uploaded by

    Tasha Derahman
    213 views12 pages
    This document discusses life cycle costing, which accumulates and manages costs over a product's life. It defines life cycle costing and explains its aims to estimate revenue and expenses at each stage. Key aspects covered include product costs, upstream/downstream costs, and managing costs through a life cycle perspective. The four stages of a product life cycle are discussed as planning/design, development, production, and distribution/support. Advantages include involvement of all costs and understanding cost factors, while disadvantages include difficulty estimating long-term costs.

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    Note on life cycle costing

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    This document discusses life cycle costing, which accumulates and manages costs over a product's life. It defines life cycle costing and explains its aims to estimate revenue and expenses at each stage. Key aspects covered include product costs, upstream/downstream costs, and managing costs through a life cycle perspective. The four stages of a product life cycle are discussed as planning/design, development, production, and distribution/support. Advantages include involvement of all costs and understanding cost factors, while disadvantages include difficulty estimating long-term costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    213 views12 pages

    Life Cycle Costing

    Uploaded by

    Tasha Derahman
    This document discusses life cycle costing, which accumulates and manages costs over a product's life. It defines life cycle costing and explains its aims to estimate revenue and expenses at each stage. Key aspects covered include product costs, upstream/downstream costs, and managing costs through a life cycle perspective. The four stages of a product life cycle are discussed as planning/design, development, production, and distribution/support. Advantages include involvement of all costs and understanding cost factors, while disadvantages include difficulty estimating long-term costs.

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    You are on page 1of 12

    LIFE

    LIFE CYCLE
    CYCLE COSTING
    COSTING
    GROUP MEMBERS :
    SITI NUR FATASHA BT DERAHMAN
    NIK NAZIERAH BT NIK ROSLI
    NURUL FATIHAH BT MD NAWI
    NORLIYANA BT ADZMI

    INTRODUCTION
    REASONS
    ADVANTAGES &
    DISADVANTAGES

    LIFE CYCLE
    BUDGET

    LIFE
    LIFE
    CYCLE
    CYCLE
    COSTING
    COSTING

    STAGES

    IMPORTANT
    ASPECTS

    MANAGING
    COST

    INTRODUCTION
    DEFINITION : an alternative approach to
    cost
    management which
    accumulates
    and manages cost over a
    products
    AIM
    life
    cycle.
    AIM
    Estimate
    Estimate the
    the ::

    How
    How much
    much revenue
    revenue of
    of product
    product that
    that will
    will
    be
    be earned
    earned

    What
    What expenses
    expenses will
    will be
    be incurred
    incurred at
    at each
    each
    stage
    of
    stage
    of the
    the value
    value chain
    chain during
    during the
    the
    products
    products estimated
    estimated life
    life cycle
    cycle duration
    duration

    Why use life cycle


    costing ?

    To understand the cost consequences of


    developing and making a product

    To identify areas in which cost reduction


    efforts are likely to be more effective

    Important aspect of life cycle


    costing

    PRODUCT COSTS

    UPSTREAM &
    DOWNSTREAM
    COSTS

    Managing cost through life


    cycle perspective

    Cost
    Committed

    Cost incurred
    when resource is
    used

    Cost will be
    incurred in the
    future because
    of decision that
    have already
    been made

    Cost
    Incurred

    Product life cycle cost


    Accumulated/product
    life cycle cost (%)
    10
    0

    Committe
    d cost

    7
    5
    50

    Incurred
    cost

    2
    5
    0

    Product
    planning &
    concept
    design

    Design &
    developme
    nt

    Production

    Distribution
    & Customer
    support

    Product life
    cycle phases

    4 Product Life Cycle


    Stages

    Product planning and initial concept design.

    I.

    Involves process of identifying any underlying conditions, assumption,


    limitations and constraints such as

    Minimum asset performance


    Maximum capital costs

    It is a valuable reference for better decision whether the plan should be


    carried on

    Product design development

    II.

    III.

    Starting from preparation of development contracts until equipment is


    ready to be introduced to the biz.
    Stage where the factory trials take place.

    Production
    All the manufacturing costs related to produce the products

    Distribution & customer (or logistical) support

    IV.

    Stage where the products are send to the customers and ready to be used.

    LIFE CYCLE BUDGET

    Definition :Estimates of a products revenues &


    expenses over its entire life cycle

    Emphasizes the relationship among


    costs incurred at different stages

    Adopts a life cycle costing approach

    ADVANTAGES

    COSTS

    EFFECTIVE
    DECISION

    Involved all costs in determining product costs


    Helps company to achieve target costs

    Helps management in purchasing department


    LCC assess and anticipate future resource
    requirement

    Helps management to understand factors that


    increase costs
    UNDERSTAND LCC shows all cost incurred before, during and after
    FACTORS
    production

    DISADVANTAGES
    Not
    Not easy
    easy task
    task

    Time
    Time
    Consuming
    Consuming

    Not
    Not easy
    easy to
    to
    design
    design
    products
    products that
    that
    have
    have longer
    longer
    lives
    lives

    Difficult
    Difficult to
    to
    estimate
    estimate
    operational
    operational &
    &
    maintenance
    maintenance
    cost
    cost

    THANK
    YOU

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