Chicken Run

Topics: Cost accounting, Cost, Costs Pages: 4 (834 words) Published: April 1, 2014
No.
Content
Page no.
1.
Introduction
1
2.
Concept
1
3.
Background
2
4.
Why used the LCC?
2
5.
The application of LCC

5.
Advantages and Disadvantages of LCC
3
7.
Conclusion
7
8.
Application to Industry
8-9
9.
Appendix
10-11
10.
References
12

Introduction

In simple definition of Life Cycle Cost (LCC) is a contemporary method that accumulated the cost of a product throughout its life cycle. This method is applied by management on the organization either for its asset base or product base. LCC also concerned with the cost of ownership over the life of an asset, and provides analysis and allocation of all related expenses that will be incurred. Life cycle costing is implementing to overcome traditional cost accounting system that leads on incorrect which not concerning the committed cost. Committed cost is the cost that excluded in product life cycle phase, such as Research and Development cost and Warranty cost. Usually, the cost ignore is approximately up to 80%-90% (exhibit 1) in the whole life cycle. (Drury, C. 6th Edition, Management and Cost Accounting) The main difference between traditional method and LCC approach has an expanded life cycle perspective, not consider only periodic costs, but also operating costs during the product’s estimated lifetime. For example, clothing and fashion goods tend to have a life cycle of one year or less. Compare to the operating costs of a school can consume the equivalent of its capital cost every four to five years and remain in service for a century.

Hence, there are the changes from traditional to make up the idea of this one of contemporary strategic management accounting (SMA) technique, which is the CONCEPT:

I. There will no longer looking for the accounting periods that only up to 12 months, but the whole product lifetime. II. Indentifying proper cost incurred during all different stages from each life cycle phase. III....
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