Life-cycle costing
Life-cycle costing tracks all costs across a product's entire life — from design through withdrawal — revealing that decisions made early commit most future spending before production ever starts.
FrameworkStrategic cost management
See it move
A new sauce launch costs €50,000 to design, €800,000 to produce over five years, €120,000 to market, and €30,000 in customer service and returns, stacking to a life-cycle cost of €1,000,000. Reporting only the annual production figure misses the €200,000 spent either side of manufacturing, understating the full commitment the firm has made to the product.
Check yourself
A product-development team is told that approximately 75 per cent of a new product's total life-cycle costs are determined during the design phase, well before production begins. Which management accounting concept does this most directly illustrate?