3 Life-cycle costing
3.1 Definition of life-cycle costing
Many goods now have very short life-cycle, e.g. personal computers. In addition many products have very high costs which are incurred before the good is launched, e.g. development of new cars.
Traditional costing techniques based around annual periods may give a misleading impression of the costs and profitability of a good.
The commitment of a high proportion of a product’s life-cycle costs at the very early stages of the cycle has led to the need for accounting systems that compare the revenues from a product with all the costs incurred over the entire product life cycle.
