Behavioral Cost
Behavioral Costing British Aerospace case study A. Introduction
When we think about the cost of an aircraft, we tend to think of the cost of buying the product rather than the costs of running it! British Aerospace’s service to the customer does not stop at the aircraft acquisition stage, when the airplane is sold to the customer. If anything, this is when the customer relationship begins.
This case study focuses upon the processes involved in behavioral costing aircraft components. Given the high specifications to which designers have to work, it is important to develop a price for customers which provide ‘Customer Satisfaction at Competitive Cost.’ British Aerospace is a major player in the world aviation industry. Its Military Aircraft Division aims ‘to remain number one in Europe and World Leader in the Military Aircraft Business.’
B. Life-cycle cost analysis
The other cost reduction technique is Life Cycle Cost Analysis to influence design. To avoid products being developed with a low acquisition cost but high operation and support costs, or vice versa, life cycle cost analysis considers the full cost of ownership of the products in the engineering and decision making process, to establish the correct balance of acquisition and in-service cost, whilst maintaining the required effectiveness of the product.
British Aerospace uses sophisticated cost modeling to investigate and estimate the life cycle cost of an airplane. This provides insight into the hidden costs of operation and support hence overcoming the iceberg syndrome. All investment involves providing a balance between reliability and the cost of ownership. Investment in improving the reliability and ease of maintenance of an aircraft will help to reduce the cost of ownership, but usually with an increase in the cost of acquisition.
During the design stage, the earlier the opportunity for improvement can be identified, the less it will cost to incorporate. Initially the benefits exceed
When we think about the cost of an aircraft, we tend to think of the cost of buying the product rather than the costs of running it! British Aerospace’s service to the customer does not stop at the aircraft acquisition stage, when the airplane is sold to the customer. If anything, this is when the customer relationship begins.
This case study focuses upon the processes involved in behavioral costing aircraft components. Given the high specifications to which designers have to work, it is important to develop a price for customers which provide ‘Customer Satisfaction at Competitive Cost.’ British Aerospace is a major player in the world aviation industry. Its Military Aircraft Division aims ‘to remain number one in Europe and World Leader in the Military Aircraft Business.’
B. Life-cycle cost analysis
The other cost reduction technique is Life Cycle Cost Analysis to influence design. To avoid products being developed with a low acquisition cost but high operation and support costs, or vice versa, life cycle cost analysis considers the full cost of ownership of the products in the engineering and decision making process, to establish the correct balance of acquisition and in-service cost, whilst maintaining the required effectiveness of the product.
British Aerospace uses sophisticated cost modeling to investigate and estimate the life cycle cost of an airplane. This provides insight into the hidden costs of operation and support hence overcoming the iceberg syndrome. All investment involves providing a balance between reliability and the cost of ownership. Investment in improving the reliability and ease of maintenance of an aircraft will help to reduce the cost of ownership, but usually with an increase in the cost of acquisition.
During the design stage, the earlier the opportunity for improvement can be identified, the less it will cost to incorporate. Initially the benefits exceed