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CMA Final · Strategic Cost Management · Product Life Cycle Costing

Which of the following is a feature of product life cycle costing that distinguishes it from conventional annual cost accounting?

Life cycle costing accumulates every cost of a product from design and development through production, marketing, service and final disposal. Conventional annual accounting looks at one period at a time and often ignores pre-production costs, so the first option alone describes the distinguishing feature.

  1. AIt accumulates costs of a product from design stage through to final withdrawal and disposalCorrect
  2. BIt reports costs only for the period in which the product is manufactured
  3. CIt excludes research and design costs because they are incurred before production
  4. DIt treats all marketing costs as period costs unrelated to the product

Explanation

Life cycle costing traces and accumulates all costs for a product across its whole life, including R&D, design, production, marketing, distribution, service and disposal. Conventional annual accounting reports period by period and often treats pre-production costs as general overheads. Hence the other options describe conventional practice, not life cycle costing.

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