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Lifecycle Costing

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95 views3 pages

Lifecycle Costing

Uploaded by

amalthomas557
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 2: Lifecycle costing

1. The following costs have arisen in relation to the production of a product:


(i) Planning and concept design costs
(ii) Testing costs
(iii) Production costs
(iv) Distribution and customer service costs
In calculating the life cycle costs of a product, which of the above items would be included?
A. (iii) only
B. (i), (ii) and (iii)
C. (i), (ii) and (iv)
D. All the above

2. In which of the following ways might financial returns be improved over the life cycle of a product?
(1) Maximising the breakeven time
(2) Minimising the time to market
(3) Minimising the length of the life cycle
a. 1 and 2
b. 1 and 3
c. 2 only
d. 2 and 3

3. The following information relates to the expected cost of a new product over its expected three-year life.

What is the expected average life cycle cost per unit?


A. $35.95
B. $46.25
C. $48.00
D. $50.95

4. The following estimates have been produced for a new product with an expected life of four years.

$
5. A company has produced the following information for a product it is about to launch. The product is expected
to have a life of three years.

What is the life-cycle cost per unit?


A. $2.81
B. $2.32
C. $3.22
D. $3.07
Ivey C0
The following scenario relates to questions 6-10.

Ivey Co is an electronics business operating within an advanced manufacturing technology environment, producing
fitness watches, weighing scales and other electronic items. It uses life cycle costing (LCC).

Ivey Co is about to launch a new electronic gadget called the Diam, for measuring health statistics in patients who
are unwell. It intends to sell the gadget to hospitals.

Required

6. What is the life cycle cost per unit for the Diam (to two decimal places)?
$

7. Which of the following costs would be included in the life cycle cost of the smart weighing scales?
Scales concept design costs INCLUDED NOT INCLUDED
Scales testing costs INCLUDED NOT INCLUDED
Scales production costs INCLUDED NOT INCLUDED
Scales distribution costs INCLUDED NOT INCLUDED

8. Which TWO of the following statements about using LCC for the diam are true?
A. LCC aims to ensure that a profit is generated over the entire life of the Diam
B. LCC focuses on the short-term by identifying costs at the beginning of the Diam's life cycle
C. LCC writes off costs to each stage of the Diam's life cycle
D. LCC ensures that the price set for the Diam is based on better knowledge of costs

9. Are the following statements true or false?


(1) Ivey Co uses an expensive costing system
(2) Ivey Co's costing system is quicker to use than traditional absorption costing
A. Both statements are true
B. Both statements are false
C. Statement 1 is true and Statement 2 is false
D. Statement 1 is false and Statement 2 is true

10. When would the bulk of Ivey Co's products' life cycle costs normally be determined?
A. At the design and development stage
B. On disposal of the products
C. When the product is introduced to the market
D. When the product is in its growth stage

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