ACCA F5 Paper - Life Cyle Costing definition

Part of the ACCA F5 Paper discusses Life-Cyle Costing. This is a simple explanatiomn and definition.

Life-cycle cost analysis became popular in the 1960s when the concept was taken up by U.S. government agencies as an instrument to improve cost effectiveness of equipment procurement. From that time, the concept has spread to the business sector worldwide, and is used in new product development studies, project evaluations and management accounting.

Life Cycle Costing (LCC) also called Whole Life Costing is a structured approach that addresses all the elements of the total cost of a product or service and can be used to produce a cost profile of the product or service over its anticipated life-span. The results of an LCC analysis can be used to assist management in the decision-making process where there is a choice of options. The accuracy of LCC analysis diminishes as it projects further into the future, so it is most valuablhttp://www.blogger.com/img/blank.gife as a comparative tool when long-term assumptions apply to all the options and consequently have the same impact. Life-cycle costing can also be used to control life-cycle costs.

In a single sentence the definition of Life Cylce Costing can be summed up: "Life cycle costing is the accumulation of costs over a product's entire life span."

For more information on Life Cylce Costing, or other aspects of the ACCA F5 paper, head to ACCA F5 study material publishers, TonySurridge.co.uk

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