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ACCA Applied Skills · Performance Management · Accounting for environmental and sustainability factors

Which of the following best describes the main benefit of life cycle costing when assessing the environmental impact of a product?

Life cycle costing brings end-of-life costs such as decommissioning and disposal into the assessment at the design stage. This makes otherwise hidden environmental costs visible across the product's whole life, rather than looking at production costs only.

  1. AIt includes end-of-life costs such as decommissioning and disposal in the assessment from the design stageCorrect
  2. BIt restricts costs to those incurred in the production phase only
  3. CIt excludes costs that are borne by customers after sale
  4. DIt allocates all environmental costs to a single general overhead pool

Explanation

Life cycle costing considers costs across the whole life of a product, including post-purchase and end-of-life costs like disposal and decommissioning. This makes hidden environmental costs visible at the design stage. Restricting to production costs is the traditional view that it improves on.

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