02/04/2015
Life cycle costs
Life cycle costs are the costs incurred on products
and services from their design stage, through
development to market launch, production and
sales, and their eventual withdrawal from the
market. A product's life cycle costs might
therefore be classified as follows.
(i) Acquisition costs (costs of research, design,
testing, production and construction)
(ii) Product distribution costs (transportation and
handling)
(iii) Maintenance costs (customer service, field
maintenance and 'in-factory' maintenance)
(iv) Operation costs (the costs incurred in
operations, such as energy costs, and various
facility
and other utility costs)
(v) Training costs (operator and maintenance
training)
(vi) Inventory costs (the cost of holding spare
parts, warehousing and so on)
(vii) Technical data costs (cost of purchasing any
technical data)
(viii) Retirement and disposal costs (costs
occurring at the end of the product's life)
Life cycle costing versus traditional management
accounting systems
