1. Life cycle costing

2. Meaning
 The term „Life Cycle cost‟ has been defined as
follows, “ It includes the costs associates with
acquiring, using, caring for and disposing of physical
asset including the feasibility studies, research,
design, development, Production, maintenance,
replacement and disposal as well as support,
training and operating costs, generated by the
acquisition use, maintenance and replacement of
permanent physical assets”.

3. Source: mimdtools.com

4. Particular Introduction Growth Maturity Decline
Phase I II III IV
Sales Volumes Initial stages, hence Rise in sales levels at Rise in sales levels at Sales level off and
low increasing rates dec. rates then start decreasing.
Prices of Products High levels to cover Retention of high- Prices fall closer to Gap between price
initial costs and level prices except in cost, due to effect of and cost is further
promotional exps. certain cases. competition. reduced.
Ratio of Promotion Highest due to effort Total exp. Remain the Ratio reaches a Reduced sales
expenses to sales needed to inform same while ratio of normal % of sales. promotional efforts
potential customers, S&D OH to sales is Such normal % as the, product is no
Launch products, reduced due to becomes the industry longer in demand.
distribute to increase in sales. standard.
customers etc.
Competition Negligible and Entry of a large Fierce Competition Starts disappearing
insignificant number of due to withdrawal of
competitors products.
Profits Nil, due to heavy Increase at a rapid Normal rate of profits Declining profits due
initial costs. pace since costs and prices to price competition,
are normalised. entry of new
products etc.

5. Concept of life Cycle Costing Involves
 identify product life cycle and estimating number of
units to be produced per period over the life cycle
of the product;
 estimating the costs involved for the same; and
 determining the average cost of production over
the product life.

6. Life Cycle of the manufactured product
 Market Research
 Specification
 Design
 Prototype manufacture
 Development
 Tooling manufacture
 Selling distribution
 Product support
 decommissioning

7. Project life cycle costing
 „it includes the costs associated with acquiring,
using, caring for, disposing of physical assets,
including the feasibility studies, research, design,
development, production, maintenance, replacement
and disposal, as well as support, training and
operating costs generated by the acquisition, use,
maintenance, and relacement of permanent physical
assets.

8. What are project life cycle costs
 Acquisition costs, i.e. cost of R&D, testing,
production etc.
 Transportation and handling costs of capital assets
 Maintenance costs of capital assets
 Operation costs
 Training costs
 Inventory costs
 Technical data costs
 Retirement and disposal costs