Product life cycle
Product life cycle is the introduction, growth, maturity and decline stages a product passes through, each carrying a different cost structure, price point and profit pattern.
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A product's life-cycle costs run €60,000 in introduction, on research and design; €140,000 in growth, on production and marketing; €90,000 in maturity, on production; and €20,000 in decline, on discontinuation — a total of €310,000. Against €410,000 of revenue earned across the same four stages, life-cycle profit is €410,000 minus €310,000, or €100,000.
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SubjectCost AccountingCoreTopicPricing & Cost ManagementCoreTopicStrategic & Lean Cost ManagementCore
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PracticeCORE
A product's life-cycle costs are €25,000 in introduction, €55,000 in growth, €40,000 in maturity and €15,000 in decline. Total revenue earned over the product's life cycle is €180,000. What is the life-cycle profit?
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