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ACCA Strategic Professional · Advanced Performance Management · Strategic management accounting

Harlow Motors is launching a new electric scooter. The management accountant proposes life cycle costing rather than only tracking production costs. Which is the main benefit of this approach for strategic decisions?

Life cycle costing captures costs from design through to disposal, and it shows that most of a product's costs are committed at the design stage. Managers can therefore influence total lifetime cost early, rather than only controlling production costs after they are already fixed.

  1. AIt treats all pre-production design and development costs as period expenses, ignoring them in pricing
  2. BIt highlights that most costs are committed during design, so total cost across the product's whole life can be influenced earlyCorrect
  3. CIt reduces the need to forecast future sales volumes
  4. DIt focuses management attention on the decline stage only

Explanation

Life cycle costing considers costs from design through to disposal, including pre- and post-production costs. A large share of costs is determined at the design stage, so early action has most effect. The other options misstate the approach.

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