(a) Explain the concept of life cycle costing and give reasons why it may be important to
use it.
(b) Using the figures from the proposal made in November 1997, draw a life cycle chart for
Sparkle. (Precision is not required.)
(c) Discuss the importance or otherwise of a post-project audit to the successful use of life
cycle costing techniques.
(d) Discuss the difficulties of using life cycle costing techniques in an organisation with
a heavy reliance on periodic reporting.
Q67: It is usually of little advantage for a company to spend a considerable effort in developing and refining the product cost system for pricing purposes. Rather, the company should spend time and money on researching customer perceptions and requirements.
Requirements
Using the case of Sparkle presented in the scenario as an illustration, answer the following:
(a) Comment on the suitability of R Ltd’s pricing policy.
(b) Discuss the opening statement.
(c) Prepare a memorandum to the chief executive of R Ltd outlining the benefits of target costing. Explain how it functions in relation both to new products and to existing products.
