A key question for many accountants will be whether the costs of developing realistic life cycle costs will outweigh the benefits to be derived from their availability

1. Contemporary Issues In
Management Accounting

2. Life Cycle Costing
 The accumulation of costs for activities that occur
over the entire life cycle of a product, from
inception to abandonment, by the manufacturer
and the customer are known as life cycle costing.
 The firm cannot regard a particular design
successful unless they meet the functionality
needs of the customer, the price demands of the
distribution channel, the manufacturability
requirements of the plant, and the financial
projections of the firm.

3. Life Cycle Cost Analysis
 Life cycle cost analysis (LCCA) is a method for assessing the
total cost of facility ownership.
 It takes into account all costs of acquiring, owning, and
disposing of an asset or asset system.
 Lowest life cycle cost (LCC) is the most straightforward and
easy-to interpret measure of economic evaluation.
 Some other commonly used measures are net savings (or net
benefits), savings-to-investment ratio (or savings benefit-to-
cost ratio), internal rate of return, and payback period.
 There are numerous costs associated with acquiring,
operating, maintaining, and disposing of any asset.

4. Project Life Cycle Costing
 Project life cycle costing is a new concept which
places new demands upon the management
accountant.
 A key question for many accountants will be
whether the costs of developing realistic life cycle
costs will outweigh the benefits to be derived from
their availability.
 Terrotechnology is concerned with pursuit of
economic life cycle costs.
 It ensures that the assets produce the highest
possible benefit for least cost.

5. Quality Costing
 As organizations strive to increase their
bottom line performance in the highly
competitive environment, they tend to forget to
integrate two important planning activities–
strategic and quality planning.
 Quality costing is used as a tool to measure
the efficiency of the entity.

6. Quality As A Competitive Tool
 The American Society for Quality Control
defines quality as the total features and
characteristics of a product or a service made
or performed according to specifications to
satisfy customers at the time of purchase and
during the use.
 Two basic aspects of quality are
 quality of design and
 conformance quality

7. Categories Of Quality Costing
 Quality costs are defined as those costs
associated with the inefficiency to achieve a
product or service quality as defined by the
requirements established by the organization and
its contracts with customers and society. Simply
stated, quality cost is the cost of poor product or
service.
 Preventive cost category
 Appraisal cost category
 Internal failure cost category
 External failure cost category

8. Cost Of Quality
 Cost of quality refers to the costs incurred to
prevent, or the costs arising as a result of
producing a low-quality product.
 Cost of quality will generally cover the
following:
 Cost of labour to fix the problem
 Cost of extra material used
 Cost of extra utilities
 Cost of lost opportunity

9. Cost Of Design Quality
 Quality of design refers to how closely the
characteristics of a product or service meet
the requirements of the customers.
 Companies must also pay attention to quality
of design by designing products that satisfy
customer needs.

10. Non-Financial Measures Of
Quality And Customer Satisfaction
 Non-financial measures indicate the future
needs and preferences of customers, as well
as specific areas that need improvement.
 To satisfy their customers, managers must
constantly improve the quality of work done
inside their company.

11. Kaizen Costing
 Kaizen costing offers something new to all
organizations, and tries to implement the
strategies to handle difficult situations up with the
increasing competition in the global market.
 It is a Japanese approach to management,
pioneered and used by large corporations.
 Kaizen focuses on continuous improvement by
successive small steps, coupled with occasional
larger breakthrough innovations.
 Kai means change and Zen means good.

12. Need For Kaizen Costing
 It requires tracing out non value- adding
activities in their manufacturing and supplying
chain to offer the products and/or services at
lower prices.
 The manufacturers or suppliers are facing
challenges like to get better results at lower
costs to enable price cuts and higher profit.

13. Kaizen Costing System
 It is a cost reduction system to reduce final
estimations to a level lower than standard
costs.
 It continuously reviews existing production
conditions in order to reduce costs.
 It emphasizes the reduction of waste in
organization’s systems and processes.

14. Empirical Case Study
 Toyota Motor Co. Ltd

15. Transforming Kaizen In Practice
 Continuous improvement can be ensured
through the following activities:
 Ennoblement
 Customer focus
 Removal of muda
 Team working
 Problem solving through employees participation
 Communications