Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

Life-cycle product budgeting and costing

Download 1.72 Mb.

View original pdf

Page	250/469
Date	01.12.2021
Size	1.72 Mb.
	#57828

1 ... 246 247 248 249 250 251 252 253 ... 469

solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1

Life-cycle product budgeting and costing
This section introduces life-cycle costing, a concept that is especially important given the frequency of changes in production and the increased magnitude of pre- and post-production costs. This approach is most helpful in industries where revenues and their related costs occur indifferent periods and are not well matched by financial accounting procedures. For example, financial accounting expenses, RD, marketing, distribution and customer service, costs in the period incurred, not when the related revenue is earned. Firms with a high percentage of total costs in these areas (e.g. real estate developers, publishers and motion picture studios) would be most likely to benefit from life-cycle costing.

Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
Life-cycle costing can be implemented fairly and easily by coding revenue and expense journal entries byproduct as well as by functional account (e.g. RD and advertising. Data can then easily be compiled for each product. At the beginning of the life cycle, it is difficult to determine how successful a product will be. Hence, the earlier in a product’s life-cycle costs are locked in (i.e. before there is much information on the probability that the product will succeed, the riskier the product.

Download 1.72 Mb.

Share with your friends:

1 ... 246 247 248 249 250 251 252 253 ... 469