Question
Question 8 Which of the following accurately describes how Life-cycle costing differs from traditio costing: Life cycle costing ignores costs incurred in the pre-production phase. Life cycle costing considers all the costs that will be incurred during the product life. Life cycle costing ignores costs incurred in the post-production phase. Life cycle costing considers the product cost and adds a mark-up to set the selling price of the product.
Answer
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Nia
Elite · Tutor for 8 years
Answer
Based on the above analysis and demonstrating, statement option B, "Life cycle costing considers all the costs that will be incurred during the product's life." correctly contains the main differences between conventional and life-cycle costing techniques. It precisely phrases out that life-cycle costing analyzes designs development, fabrication, possession, endurance and elimination, however characteristic thats distinguishing it from the traditional one. Traditional costing, meanwhile, would leave out the ignored stages of lifecycle analysis system. The provided description is consistence with what we find out about life-cycle costing systems in a total life-cycle palmyra palm picture.
Explanation
## First, we make a clear understanding about the difference between life-cycle costing and traditional costing. ## Traditional costing is a method in managerial and cost accounting. It first allocates indirect costs to different departments within a factory, and then assigns those costs to the products. As a practice of the past, it only includes manufacturing costs: raw material, labor and factory overhead. ## On the contrary, Life-cycle costing, a form of activity-based costing, is a financial analysis of a product's entire life-with stages: conception of a product, research and development, production, sales, maintenance service and its disposal after its useful life. ## Avoid the highest frequently made misunderstanding about life cycle costing, that it considers not only the pre-production cost, but also ongoing costs such as maintenance and updating, and post-production definitely including cost of displacement or demolition, an ontology for the captivatingly important axiom for anyone working with. Life cycle costing also encapsulates a "sequence of operations" costs identification.