A Different Type of Costing

Posted by Tiffany Bradford May 8, 2008

When looking at how to determine costing for their business, many people do not look beyond the basic types (i.e. job-order, process, etc.) to other types of costing that may be beneficial to their business such as life-cycle costing. This may be because they do not see the benefit of costing that does not follow GAAP (meaning further down the life of the product, costs will have to be accounted for in a fashion that is acceptable by GAAP), or because this type of costing is not understood.

Life-cycle costing can be very beneficial for a business because it allows a firm to look at the total estimated costs and revenues of a project before the product goes into the production phase. By identifying costs down the chain, a product manager can look at items in the design phase that can be adjusted to minimize costs in the future. It can also help the product manager to determine if a product is really worthwhile before costs are committed.

Although future costs and revenues must be estimated, life-cycle costing can be a huge help to a product manager and development team, as well as a company’s finance team. More information on life-cycle costing can be found in this article on Life-Cycle Costing .