LIFE CYCLE

COSTING
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PRODUCT LIFE CYCLE

COSTING
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MEANING
Product life cycle (PLC) is the cycle through which
every product goes through from introduction to
withdrawal of it.

A product’s life cycle costing refers to the costs that

are incurred from its design stage through
development to market launch, production and
sales, and finally to its eventual withdrawal from
the market.
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PHASES IN PRODUCT
LIFE CYCLE
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INTRODUCTION PHASE
⊸ New product is launched in to the
market.
⊸ Promotional cost and distribution
cost will be high
⊸ Sales and revenue will be low
⊸ Profits are negative
⊸ Low or no competition
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GROWTH PHASE
⊸ In the growth phase the product penetrate or
makes it place in the market.
⊸ public awareness increases
⊸ Low cost
⊸ Sales will increase because of the effects of
introductory promotion and distribution of the
product.
⊸ Profits and revenue begin to increases.
⊸ Increasing competition
⊸ Marketing techniques
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MATURITY PHASE
 Most Profitable
Increased Competition

Less Market Share

Product Innovation

Decrease in Price

Decrease in Profits

Marketing Strategies
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SATURATION PHASE

 After
a certain period, the maturity phase
reaches a point where growth becomes stagnant.

 As the market becomes saturated, pressure is

exerted for new product and sales along with
profit begins to fall.
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DECLINE PHASE
⊸ In the decline stage, product sales drop significantly
and consumer behaviour changes as there is less
demand for the product. The company's product loses
more and more market share, and competition tends
to cause decline in sales.
⊸ Marketing in the decline stage is often minimal or
targeted at already loyal customers, and prices are
reduced.
⊸ Eventually, the product will be retired out of the
market unless it is able to redesign itself to remain
relevant or in-demand
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CHARACTERISTICS OF PRODUCT
LIFE-CYCLE
 The products pass through the cycle of
development and deletion at varying speeds.
 Product cost, revenue and profit patterns tend to
follow predictable courses through the product life-
cycle.
 Profit per unit varies as products move through
their life-cycles
 Each phase of product life-cycle poses different
threats and opportunities.
 Products require different functional emphasis
in each phase.
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PRODUCT LIFE-CYCLE & COST
CONTROL
⊸ Product life-cycle is the pattern of expenditure, sales
level, revenue and profits over the period from new
idea generation to the deletion of product from
product range.
⊸ It is critical to control costs in the development stage
of product even through much of the product costs
are not actually incurred later.
⊸ The major benefit of adapting product life-cycle
costing is that it provides an overall framework for
considering total incremental costs over the entire
life span of the product.
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PROJECT LIFE CYCLE COSTING

Project life cycle costing is a technique which takes account of

the total cost of owning a physical asset ,or making a product
,during the economic life of the project .

It is also incurred for product and service from their design

stage through development to market launch , production and
sales , and their eventual withdrawal from the market .
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THE COMPONENT ELEMENT

OF PLC

1. Acquisition cost
2. Transportation and Handling cost
3. Maintenance cost
4. Operational cost
5. Training cost
6. Inventory cost
7. Technical data cost
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CATEGORIES OF PROJECT
LIFE CYCLE COSTING

IF ASSET IS CONTRUCTED “ IN HOUSE ” IF ASSET PURCHASED FROM A SUPPLIER

Research and Development . Acquisition .

Design specifications . Installation .

Manufacturing . Commissioning .

Quality control and testing . Obtaining spares .

Recruitment and training of operations staff and Recruiting and training of operations staff and
maintenance engineers . maintenance engineers.
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OPERATING COST
Operating cost for an item include not
just operational cost and maintenance
cost, but also Indirect materials, tools,
and cost of support services such as
material handling, quality control energy
cost, continued training requirement for
new staff so on.
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FACTORS OF OPERATING COST

 The cost of poor performance
 The cost of low utilization
 The cost of low production
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DISPOSAL COSTS

⊸ Disposal cost are expenses that are directly

related to asset disposal. Disposal costs can
be significant for a fixed asset, because the
asset must be demolished or dismantled and
removed and the site made good for other
use.
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HIDDEN COST
Hidden cost are unforeseen expenses added
on to purchase which is not normally
included in the purchase price of an
equipment or machine

E.g. Credit card fees

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PRESENTED BY

⊸ Chaitra RV
⊸ Student Mcom(FA)
⊸ presidency college