Lifecycle costing - P2

Question 1

What is lifecycle costing?

Answer 1

Lifecycle costing is the accumulation of costs for activities that occur over the entire life cycle of a product.

Question 2

What are the four stages of lifecycle costing?

Answer 2

Introduction
Growth
Maturity
Decline

Question 3

What happens during the introduction phase?

Answer 3

Demand will be low when product is first launched, heavy advertising expenditure, aim is to establish product in the market

Question 4

What happens during the growth stage?

Answer 4

Demand shows a steady and often rapid increase, cost per unit falls because of economies of scale with greater level of production, aim is to establish a large market share.

Question 5

What happens during the maturity stage?

Answer 5

Demand slows down, product reaches the mass market.

Question 6

What happens during the decline stage?

Answer 6

sales curve begins to decline, price wars erupt as organisations with elastic demand seek to maintain full utilisation of their production capacity.

Question 7

How do we maximise a products return over its life cycle?

Answer 7

Design costs out of product
Minimise time to market
Maximise length of the life cycle

Question 8

What can lifecycle costs be classified as?

Answer 8

Development costs
Design costs
manufacturing costs
marketing costs
distribution costs