Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 55

Life Cycle Costing; Service Department In the chapter we illustrated the use of the life cycle concept for both the cost and sales life cycle of a company’s product lines. It can also be useful to extend the cost life cycle to the service department. In Chapter 7 we were interested in the allocation of service department costs to product lines. Here we are interested in managing the costs of a service department over its life cycle. The information technology department (IT) is a good example. The costs incurred in IT have the following phases:

1. Acquisition of IT assets including computers, hubs, cables, and other assets.

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2. Acquisition of software and deployment of IT for the desired application and functionality.

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3. Maintain management and operations of the IT assets.

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4. Provide user support.

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5. Retire the assets on a planned schedule and replace as needed. Required How can life cycle costing help in the management of the IT department?

Required How can life cycle costing help in the management of the IT department?

Step 1 of 2

9591-13-34E AID: 251505 | 17/08/2020

Life cycle costing:

Life cycle costing is a process that shows that how much amount an owner is ready to pay for the useful life of an asset. Future additional investment and initial investment, minus salvage values involved in the costs. Life cycle costing is also including the maintenance and operating cost of an asset.