Life Cycle Costing
LIFE CYCLE COSTING Life cycle costing (LCC) is the process of collecting, interpreting and analyzing data and using quantitative tools and techniques to predict the future resources that will be required in any life cycle of a system of interest. LCC can also be defined as a technique to establish the total cost of ownership. It is a structured approach addresses all the elements of this cost and can used to produce a spend profile of a product over its life span.
The result of LCC usually use to assist management in the decision making process when there is a choice of product. The accuracy of LCC analysis diminishes as it projects further into the process. It is the most comparative tool when long term assumptions apply to all the options and frequently have the same impact.
The life cycle costs which are the output of this process include not only the costs of acquisition but inner cost that logically attributed to the program throughout its life. The concept of total ownership is related but broader in scope. When used as a key measure, it can reflect differences in relative procurements options and support solutions expressed in monetary terms. In other words, Life Cycle Costing is a cost management approach where costs are accumulated and managed over a product’s life cycle, not over accounting period. Like other techniques, Life Cycle Costing (LCC) has its own benefit and disadvantage. There are four main benefits of LCC and two disadvantages.
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APPLICATION OF LIFE CYCLE COSTING
Life cycle can be split into 5 phases, which are Development, Introduction, Growth, Maturity and Decline. Life cycle will be different for different product; some may have a very short life cycle while some have a very long life cycle.
1) Development
Development is a phase where a product is being tested and a prototype is developed. A research on customer needs and demands are conducted. The cost that could possibly being
The result of LCC usually use to assist management in the decision making process when there is a choice of product. The accuracy of LCC analysis diminishes as it projects further into the process. It is the most comparative tool when long term assumptions apply to all the options and frequently have the same impact.
The life cycle costs which are the output of this process include not only the costs of acquisition but inner cost that logically attributed to the program throughout its life. The concept of total ownership is related but broader in scope. When used as a key measure, it can reflect differences in relative procurements options and support solutions expressed in monetary terms. In other words, Life Cycle Costing is a cost management approach where costs are accumulated and managed over a product’s life cycle, not over accounting period. Like other techniques, Life Cycle Costing (LCC) has its own benefit and disadvantage. There are four main benefits of LCC and two disadvantages.
4: :2
APPLICATION OF LIFE CYCLE COSTING
Life cycle can be split into 5 phases, which are Development, Introduction, Growth, Maturity and Decline. Life cycle will be different for different product; some may have a very short life cycle while some have a very long life cycle.
1) Development
Development is a phase where a product is being tested and a prototype is developed. A research on customer needs and demands are conducted. The cost that could possibly being