Meaning The term „Life Cycle cost‟ has been defined as follows, “ It includes the costs associates with acquiring, using, caring for and disposing of physical asset including the feasibility studies, research, design, development, Production, maintenance, replacement and disposal as well as support, training and operating costs, generated by the acquisition use, maintenance and replacement of permanent physical assets”.
Particular Introduction Growth Maturity Decline Phase I II III IVSales Volumes Initial stages, hence Rise in sales levels at Rise in sales levels at Sales level off and low increasing rates dec. rates then start decreasing.Prices of Products High levels to cover Retention of high- Prices fall closer to Gap between price initial costs and level prices except in cost, due to effect of and cost is further promotional exps. certain cases. competition. reduced.Ratio of Promotion Highest due to effort Total exp. Remain the Ratio reaches a Reduced salesexpenses to sales needed to inform same while ratio of normal % of sales. promotional efforts potential customers, S&D OH to sales is Such normal % as the, product is no Launch products, reduced due to becomes the industry longer in demand. distribute to increase in sales. standard. customers etc.Competition Negligible and Entry of a large Fierce Competition Starts disappearing insignificant number of due to withdrawal of competitors products.Profits Nil, due to heavy Increase at a rapid Normal rate of profits Declining profits due initial costs. pace since costs and prices to price competition, are normalised. entry of new products etc.
Concept of life Cycle Costing Involves identify product life cycle and estimating number of units to be produced per period over the life cycle of the product; estimating the costs involved for the same; and determining the average cost of production over the product life.
Life Cycle of the manufactured product Market Research Specification Design Prototype manufacture Development Tooling manufacture Selling distribution Product support decommissioning
Project life cycle costing „it includes the costs associated with acquiring, using, caring for, disposing of physical assets, including the feasibility studies, research, design, development, production, maintenance, replacement and disposal, as well as support, training and operating costs generated by the acquisition, use, maintenance, and relacement of permanent physical assets.
What are project life cycle costs Acquisition costs, i.e. cost of R&D, testing, production etc. Transportation and handling costs of capital assets Maintenance costs of capital assets Operation costs Training costs Inventory costs Technical data costs Retirement and disposal costs