Life cycle costing is a system that tracks and accumulates the actual costs and revenues attributable to cost object from its invention to its abandonment. Life cycle costing involves tracing cost and revenues on a product by product base over several calendar periods.
The following are benefits of product life cycle costing:
- help to assess the profitability over the entire product life cycle.
- Useful for organization producing products with a shorter life cycle.
- helps i n earlier actions to generate more revenue and reduce costs.
- Encourage longer-term thinking and forward planning
- Better decisions will follow from an accurate assessment of total costs and revenues.