ACCA Performance Management (F5) Certification Practice Exam

Which is NOT a benefit of Life Cycle Costing?

1. Providing the true financial cost of a product

2. Avoiding expensive errors

3. Ensuring higher costs at initial stages

4. Enabling better selling prices to be set

The correct answer is: Ensuring higher costs at initial stages

Life Cycle Costing is a strategic approach to managing the total cost of ownership of a product throughout its entire life cycle, from inception to disposal. One of the essential aspects of Life Cycle Costing is that it helps organizations understand all costs associated with a product, including development, production, operational, and disposal costs. The first option highlights the true financial cost of a product, which Life Cycle Costing successfully provides. By considering all associated costs, management can make more informed decisions regarding pricing and profitability. The second option emphasizes the benefit of avoiding expensive errors. Life Cycle Costing gives insights into potential issues and costs throughout a product's life, enabling firms to plan and mitigate risks effectively. The fourth option discusses how Life Cycle Costing can facilitate better selling price determination. By understanding total costs and the value provided, firms can set prices that reflect their broader strategy and market positioning. In contrast, the notion of ensuring higher costs at initial stages does not align with the fundamental benefits of Life Cycle Costing. This method aims to provide a comprehensive view that can actually help in reducing costs through better planning and design. Higher initial costs may not be a deliberate outcome but rather a perspective that can lead to obscuring the potential benefits of cost management over the product’s