Lifecycle costing is the maintenance of physical asset cost records over entire asset lives. This means decisions around the acquisition, use or disposal of assets can be made in a way that achieves the optimum asset usage at the lowest possible cost to the entity.
Why do we need life cycle costing?
Life cycle costing in accounting enables you to plan efficiently and cut costs along the way. It is used by businesses that are involved in long-term planning. Life cycle costing enables businesses to make better decisions with regard to their investments.
For what type of firms is life cycle costing most appropriate and why?
Life-cycle costing is most appropriate for firms that place an emphasis on long-range planning, so that their multi-year profits are maximized or those who pay attention on high immediate cost.