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ACCA Applied Knowledge · Management Accounting · Alternative cost accounting principles

Which of the following is a feature of life cycle costing?

Life cycle costing tracks and accumulates a product's costs over its entire life, from design and development through production and sales to decommissioning or disposal. This gives a whole-life view of profitability rather than reporting one accounting period at a time.

  1. AIt ignores costs incurred before production starts, as they are sunk
  2. BIt reports costs only for the current accounting period
  3. CIt tracks and accumulates costs of a product over its whole life, including design and development and end-of-life costsCorrect
  4. DIt treats all costs as variable to production volume

Explanation

Life cycle costing accumulates costs from conception through development, production, selling and decommissioning, giving a whole-life view of profitability. Pre-production costs are specifically included, so A is wrong. It is not limited to one period, and costs are not all treated as variable.

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