Life Cycle Costing (2) Flashcards
Ways to maximise return over the product life cycle?
Design costs out of products
Minimise the time to market
Minimise breakeven time
Extend the length of the life cycle itself
Why must design and production teams work together to ensure costs are minimised?
Approximately 70-90% of a product’s life cycle costs are determined by decisions made early in the life cycle at design and development stage
What does minimise the time to market mean?
Time from the conception of the product to its launch
If a company can get a product to the marketplace very quickly?
Gives the product as long a span as possible without competitor’s rival products. Thereby, market share is increased
What do pricing strategies affect?
Both contribution and volumes generated
Why is a short breakeven time important?
For liquidity purposes
How to extend the length of the life cycle?
In product development, finding other uses fro a product or staggering the launch of the product in different markets
What should not be considered for commercial development in life cycle costing?
Clean-up costs
Products that are not expected to be profitable after allowing for design and development costs
What is a feature of many competitive markets?
The product life cyclkes are getting shorter, and roganisations must continually redesign existing products and develop new ones
What stages are critical to an organisation’s costs and profits?
The planning, design and development stages of a product’s cycle
What can be done to achieve certain level of cost at different stages of the product’s life cycle?
The techniques for life cycle costing and target costing are combined
As there will be different level of demand for a product over its expected life?
Would not be appropriate to set one price for the product’s entire life
An understanding of the life cycle phases allows me to?
Enables me to priuce accordingly to either manipulate demand or to maximise profit
What enables true assessment of a product’s profitability?
All costs including R&D are associated with the product
Why can viewing profitability ona periodic basis be bad?
It puts unnecessary pressure on management because the visibility of the initial loss could lead to incorrect decisions later
