Assessment for Managerial Accounting Term Paper

Assessment for Managerial Accounting - Term Paper Example Due to this particular fact, the prices of the material as a percentage of sales have decreased. Keeping the reorganization into consideration, the sales revenue will increase due to the increase in the production. In the first phase of the cycle, all the committed costs are incurred. Committed or locked in costs are those cost that have not been incurred currently, but they will be incurred in the future based on the decisions that have already been taken in relation to the product. The examples of cost incurred in the first phase of the product life cycle designing are cost product’s material and labor input and the production process. These costs are very difficult to alter once they have been committed to. In the second phase of the product life cycle costing, cost incurred is included. Costs are incurred when a resource is used or sacrificed. In the second phase of the cycle, only such costs are recorded that have been incurred. An analysis of the life cycle costing system would present the fact that 80% of the cost of any product is committed into in the first phase of the cycle, whereas the second phase of the cycle present such cost which have been incurred. Majority of these costs are the same which were already committed in the first phase of the project. In the life cycle costing cost can be effectively managed in the first phase of the cycle in which the planning of the product design and planning takes place. In the third phase of the product life cycle, the post sales service cost are estimated such as warranty costs, installation charges and the cost for discontinuing the operations at the end of the economic life cycle of the product. In the traditional product costing system, the management accounting systems are focused primarily on the manufacturing stage of a product’s life cycle. The cost which have been incurred before manufacturing, such as the research and