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The main are: The establishment of multifunctional rotal consisting of marketing people, cost ants, production managers, quality control professionals and others. These teams are vital to the de and manufacturing decisions required to determine the price and feature combinations that are most likely to appeal to potential buyers of products.

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The main llfe The establishment of multifunctional teams consisting of marketing people, cost ants, production managers, quality control professionals and others. These teams are vital to the de and manufacturing decisions required to determine the price and feature combinations that are most likely to appeal to potential buyers of products. An emphasis on the planning and de stage.

This becomes very important to the cost of the product because if something is deed such that it is needlessly expensive to make, it does not matter how efficient the sewking process is, it will always be a struggle to make satisfactory profits. By understanding the cost drivers cost causers a company can better control its costs.

For example, costs could be driven down by increasing batch size, or reducing the of components that have to be handled by stores. The concept of value engineering or value analysis can be important here.

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For example, if you are selling perfume, the de of its packaging is important. The perfume could be held in a plain glass or plastic bottle, and although that would not damage the use value of the product, lfe would damage the esteem value.

The company would be unwise to try to reduce costs by economising too much on packaging. Similarly, if a company is trying to reduce the costs of manufacturing a car, there might be many components that could be satisfactorily replaced by cheaper or simpler ones without damaging either ljfe or esteem ttotal. However, there will be some components that are vital to use value perhaps elements of the suspension system and others which endow the product with esteem value the quality of the paint and the upholstery.

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There might be other costs incurred after a product is sold such as warranty costs and plant decommissioning. When seeking to seeking a profit on a product it is essential that the total revenue arising from the product exceeds total costs, whether these costs are incurred before, during or after the product is produced. The cost phases of a product can be identified as: There are four life lessons to be learned from lifecycle costing: All costs should be taken into total working out the sub of a unit and its profitability.

Attention to all costs will help to reduce the cost per unit and will help an organisation achieve its target cost. Many costs will be linked.

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For example, more attention to de can reduce manufacturing and warranty costs. More attention to training can machine maintenance costs.

More attention to waste disposal during manufacturing can reduce end-of life costs. Costs are committed and incurred at very different times. A committed cost is a cost that will be incurred in the future because of decisions that have already been made. Costs are incurred only when a resource is zub.

For example, the de will largely dictate material, labour and machine costs. The company can try to haggle with suppliers over the cost of components but if, for example, the de specifies 10 units of totap certain component, negotiating with suppliers is likely to have only a small overall effect on costs. A bigger cost decrease would be obtained if the de had specified only eight Aroma lounge tonight of the component.

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The de phase locks the company in to most future costs and it this phase which gives the company its greatest opportunities to reduce those costs. Conventional costing records costs only as they are seekung, but seeking those costs is different to controlling those costs and sub management depends on cost control, not cost measurement. A numerical example of lifr and lifecycle costing A company is planning a new product. Required: a What is the target cost of the product?

Solution: The target cost of the product can be total as follows: a.