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ACCA Applied Knowledge · Management Accounting · Alternative cost accounting principles

Which action is most consistent with reducing a product's life cycle cost, given that a high proportion of costs are committed at the design stage?

Spending more on design is the best action, because most of a product's lifetime costs are committed at the design stage. Extra upfront design effort can reduce later production, servicing and disposal costs and so lowers the total life cycle cost.

  1. ASpending more on design to reduce later production and disposal costsCorrect
  2. BDelaying all cost analysis until production begins
  3. CCutting marketing spending only after launch
  4. DIgnoring disposal costs as they occur last

Explanation

Most of a product's lifetime costs are determined at the design stage, so extra design spending can reduce later production, service and disposal costs. Delaying analysis means missing the chance to influence committed costs. Disposal costs form part of whole-life cost.

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