CHARACTERISICS OF PRODUCT LIFE CYCLE COSTING

The main characteristics of product life cycle costing comprises:

• tracing of costs and revenues of each product over the several calendar periods throughout their entire life cycle
• traces research and design and development costs and total magnitude of these costs for each individual product and compared with product revenue
• report generation for costs and revenues.

WHAT IS PRODUCT LIFE CYCLE COSTING?

Product life cycle costing is a costing methodology or approach enabling the user to understand a long term picture of the life of a product in terms of:

• profitability;
• feedback on the effectiveness of life cycle planning and
• cost data to clarify the economic impact of alternatives chosen in the design, engineering phase,etc.

Cost accountants view this methodology as a way to enhance control of the manufacturing costs at each stage of a product life’s cycle. It enables better visibility of the costs for each individual product and to compare the product revenue generated in later period.