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CMA Final · Strategic Cost Management · Product Life Cycle Costing

A product's life cycle cost is the total of costs incurred from design through to withdrawal and support. Which of the following costs would be classed under the 'pre-production (upstream)' phase for life cycle costing?

Research and development and design cost belongs to the pre-production phase because it is incurred before commercial manufacturing starts. Warranty repairs, distribution and disposal arise during or after sales and are therefore downstream or end-of-life costs in product life cycle costing.

  1. AWarranty repairs after sale
  2. BResearch and development and design costCorrect
  3. CDisposal and decommissioning cost
  4. DDistribution cost during the sales period

Explanation

Pre-production or upstream costs arise before manufacturing starts, such as R&D, design and testing. Warranty, distribution and disposal arise later, in the production, sales or end-of-life phases.

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