What is the difference between life-cycle costing and traditional costing?

What is the difference between life-cycle costing and traditional costing?

Life-cycle costing considers all costs associated with a product over its entire life, while traditional costing focuses on immediate expenses.

Can you give me an example of life-cycle costing in practice?

Sure! For instance, when purchasing a machine, life-cycle costing would include purchase price, maintenance, operation, and disposal costs.

Why is life-cycle costing important for businesses?

It's important because it helps businesses make informed decisions by understanding the total cost of ownership, leading to better budgeting and resource allocation.

Are there any drawbacks to using life-cycle costing?

Yes, it can be complex and time-consuming to calculate, and it may require detailed data that isn't always readily available.

How can I implement life-cycle costing in my organization?

You can start by training your team on the concept, gathering relevant data, and integrating life-cycle costing into your financial analysis processes.