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

Exercise 28

Investment Centers; The Cost Life Cycle As explained in Chapter 13, the cost life cycle consists of the phases a product goes through within a firm to prepare the product for distribution and service. The five phases of the cost life cycle are: (a) research and development, (b) design, (c) production, (d) marketing and distribution, and (e) customer service.

The early phases of the cost life cycle are particularly important in that a relatively high percentage (some say as high as 80 percent or more) of the product’s life-cycle costs are determined at these phases. That is, the downstream costs of manufacturing, service, and repair are a direct consequence of the quality of the design.

Required At which phases of the cost life cycle, if any, should investment-center evaluation methods be used, and why?

Step 1 of 2

The primary goal of most of the business organization is to maximize profit. Now, managers have different approach and strategies to achieve this goal. It is necessary to have timely and periodic evaluation of the financial performance of the decisions taken by these managers. It helps is knowing the mistakes made and make changes that are needed.