Life cycle costing is a management accounting technique that considers all costs associated with a product from its inception to its disposal (cradle-to-grave). A fundamental principle of this approach is that the vast majority of a product's total life cycle costs are committed or "locked-in" during the early design and development stages. Decisions made about materials, manufacturing processes, and product specifications at this point determine the costs that will be incurred throughout the subsequent production, marketing, service, and disposal phases. Therefore, effective cost management must focus heavily on this initial design stage to control the total cost over the product's life.

B. wasted: Costs incurred during the design phase are essential investments, not inherently waste. Poor design can lead to waste later, but the design costs themselves are purposeful.

C. under absorbed: This is a technical term from absorption costing related to the allocation of fixed overheads, which is not the primary focus of the strategic life cycle costing model.

D. amortised: Amortisation is an accounting procedure for allocating the cost of an intangible asset over its useful life; it describes an accounting treatment, not the economic principle of cost commitment.

---

1. Drury

C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning. In Chapter 20

Section 20.3

"The benefits of life-cycle costing

" it is stated

"Studies have shown that approximately 70–90% of a product’s life-cycle costs are determined by decisions made early in the life cycle

at the design and development stages."

2. Kaplan

R. S.

& Atkinson

A. A. (1998). Advanced Management Accounting (3rd ed.). Prentice Hall. Chapter 1

"The Changing Business Environment

" discusses how the new competitive environment requires a focus on the design stage where costs are committed

stating

"The opportunity for cost reduction is greatest during the design stage of a product... once a product has been designed and is in production

very little can be done to reduce its cost." (p. 11).

3. CIMA (2019). CIMA P2 Advanced Management Accounting Study Text. Kaplan Publishing. The chapter on 'Costing techniques for decision-making' explains life cycle costing and emphasizes that the majority of costs are locked in at the design stage

making it the most critical phase for cost management. This concept is a core part of the CIMAPRO19-P02-1 syllabus.