Understanding Life Cycle Cost

When making purchases for your drinking water system, it can seem easiest to go with the cheapest option. But the initial cost is not the only factor to take into consideration. Life cycle cost considers initial cost as well as the cost installation, management, repairs, removal, and more in order to give a more accurate depiction of how much you will pay long term.

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But whats the difference between LCC and TCO?

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WHAT IS IDC COST i.e Interest during Construction cost?

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0:50

[@مهندسمحمد-ي7ي]

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[@ntcuong01ct1]

Dear friends,
I have a case:
In 2018 year, the ABC company release software X version 1.0, lifecycle is 2 years and upgrade few small functions, initial capital is 500k USD.
In 2020 year, the ABC company release software X version 2.0 (from previous version) , lifecycle is 3 years and upgrade few small functions, initial capital is 300k USD.
Question : How we define the sale price of this software of each version by lifecycle costing?. Thank you.

[@savitan6027]

use net present value and compare

[@ntcuong01ct1]

@@savitan6027 , this is lifecycle costing

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[@danishsyamil1015]

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[@ntcuong01ct1]

Dear Friends,
I have many questions:
1 / Life cycle costing can include cost of Marketing cost, SG&A (Selling, General & Administrative Expense) costs?
2 / Life cycle costing can be applied to products with an expected lifecycle of 10 years, 20 years.
3 / Initially, 1 product had 5 features. After 2 years, this product has 2 more features, must be recalculated for a new life cycle costing ?.
4 / Is the product life determined by the subjective intention of the CEO and CFO ?, does this product life mean that this product will be sold on the market from the time of introduction until removed from the market?
5 / What are the signs between the 2 stages of introduce and Growth?
6 / What are the signs between Growth and Maturity?
Thank you.

[@Hayat-og1ne]

1. Yes, life cycle costing can include marketing costs and SG&A (Selling, General & Administrative Expense) costs. In life cycle costing, all relevant costs incurred throughout the entire life cycle of a product are taken into account. This includes not only direct costs associated with manufacturing but also indirect costs such as marketing expenses and SG&A costs that are necessary for the product's promotion, distribution, and support throughout its life cycle.
2. Yes, life cycle costing can be applied to products with different expected lifecycles, including those with a lifespan of 10 years or 20 years. The purpose of life cycle costing is to capture all costs associated with the product from its inception to its disposal, regardless of the duration of the life cycle.
3. Yes, when a product undergoes changes or modifications that add new features, it is advisable to recalculate the life cycle costing. The additional features may impact the costs associated with production, marketing, maintenance, or disposal. By recalculating the life cycle costing, the organization can update the cost estimates and assess the financial implications of the product changes.
4. The determination of a product's life cycle is not solely based on the subjective intention of the CEO and CFO. The product life cycle refers to the stages a product goes through from its introduction to its eventual withdrawal from the market. It is influenced by factors such as market demand, customer preferences, competition, technological advancements, and regulatory requirements. The decision to introduce or discontinue a product is usually based on a combination of strategic considerations, market conditions, and financial viability.
5. The stage between introduction and growth is typically characterized by certain signs, which may include:
- Increasing sales and market acceptance: The product starts gaining traction in the market, and sales begin to rise.
- Growing customer base: The product attracts new customers, and its user base expands.
- Positive customer feedback and reviews: Customers provide positive feedback and testimonials, indicating satisfaction with the product's performance and value.
- Increasing market share: The product captures a larger share of the target market compared to competitors.
- Expansion of distribution channels: The product is made available through additional sales channels or partnerships, allowing wider market reach.
6. The signs between growth and maturity can include:
- Slowing sales growth: The rate of sales growth begins to decline compared to the previous stage.
- Market saturation: The product reaches a point where most potential customers in the target market have already adopted it, resulting in limited opportunities for further market expansion.
- Intensifying competition: Competitors may enter the market with similar products, leading to increased competition for market share.
- Price stabilization: The price of the product stabilizes as competition increases and market conditions normalize.
- Increased focus on customer retention and loyalty: Organizations may shift their focus from acquiring new customers to retaining existing ones and building customer loyalty through enhanced customer service and product differentiation.
It's important to note that these signs are general indicators, and the specific characteristics and timelines of each stage can vary depending on the industry, product type, and market dynamics.

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