Chapter 8

Question 1

Total-Life-Cycle Cost (TLCC)

Answer 1

the approach companies now use to understand and mangage all costs incurred in product design and development, through manufacturing, marketing, distribution, maintenance, service, and finally disposal.

• managing life-cycle costs is also known as managing costs “from the cradle to the grave”

Question 2

Research, Development, and Engineering Stage

(RD&E)

Answer 2

Consists of 3 substages:

1. Market research
2. Product Design
3. Product Development

Question 3

Market Research

Answer 3

• During which emerging customer needs are assessed and ideas are generated for new products

Question 4

Product Design

Answer 4

• During which scientists and engineers develop the technical specifications of products

Question 5

Product Development

Answer 5

During which the company creates features critical to customer satisfaction and designs prototypes, production processes, and any special tooling required

Question 6

Manufacturing Stage

Question 7

Total-Life-Cycle Costing: Relationship between committed costs and incurred costs

Answer 7

• for moderate to long life-cycle products, the costs incurred during RD&E will be less than 10% of total-life-cycle costs
• However, the decisions made during the RD&E stage will determine 80% of the costs that will be incurred in subsequent stages

Question 8

Postsale Service and Disposal Stage

Answer 8

• the actual service stage begins once the first unit of a product is in the hands of the customer
• Consists of 3 subcategories
  
  • Rapid growth from the first time the product is shipped through the growth stage of its sales
  • Transition from the peak of sales to the peak in the service cycle
  • Maturity from the pak in the service cycle to the time of the last shipment made to a customer; disposal occurs at the end of a product’s life and lasts until the customer retires the final unit of a product

Question 9

Target Costing

Answer 9

• developed to help them consider manufacturing costs early in their design decisions
• an important managment accounting method for cost reuction during the design stage of a product’s life cycle and one that can explicitly help to mangage total life-cycle costs

Question 10

Traditional and Cost-Plus

Answer 10

• In both, product designers do not attempt to achieve a particular cost target
• the company either accepts the profit margin allowed as the difference between the market-determined selling price and the estimated product’s cost

Question 11

Target Costing (cont.)

Question 12

Target Costing differences

Answer 12

• market research under target costing is not a single event as it often is under the traditional approach
  
  • the approach is customer driven, with customer input obtained continually throughout the process
• the product engineers attempt to design costs out of the product and development ends and manufacturing begins
  
  • particularly effective
• target costing uses the total-life-cycle concept by adopting the perspective of minimizing the cost of ownership of a product over its useful life
  *

Question 13

Target Cost

Question 14

Value Engineering Process

Question 15

Two additional target costing differences

Question 16

Cross-Functional Product Teams

Question 17

Supply Chain Management

Answer 17

• develops cooperative, mutually beneficial, long-term relationships between buyers and suppliers
• many benefits
  *