Life Cycle Cost Analysis Quiz
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Questions and Answers

Which of the following components is not included in the First Cost of Life-Cycle Cost?

  • Installation
  • Machines
  • Training
  • Operating Costs (correct)
  • Which element is associated with the Operating and Maintenance cost in the Life-Cycle Cost framework?

  • Tooling
  • Installation
  • Support Equipment
  • Material (correct)
  • Which of the following is considered part of the First Cost in Life-Cycle Cost analysis?

  • Operational Training
  • Labor
  • Maintenance Supplies
  • Tools (correct)
  • In the context of Life-Cycle Cost, which option consists solely of initial investment costs?

    <p>First Cost</p> Signup and view all the answers

    Which of these costs is least likely to be categorized under Operating and Maintenance costs?

    <p>Training Expenses</p> Signup and view all the answers

    What is the primary focus of a product life-cycle in relation to costs?

    <p>Covering costs in all categories of the life cycle</p> Signup and view all the answers

    Which of the following components is NOT typically considered within the life-cycle cost concept?

    <p>Employee training costs</p> Signup and view all the answers

    In the context of life-cycle costs, which of the following is true?

    <p>Life-cycle costs are concerned with the ongoing maintenance and support of a product.</p> Signup and view all the answers

    Which statement best describes the term 'life cycle cost'?

    <p>It includes all costs attributed to a product from inception to disposal.</p> Signup and view all the answers

    What do disposal costs specifically refer to?

    <p>Costs associated with disposing of waste materials.</p> Signup and view all the answers

    Why is understanding life-cycle costs important for engineers?

    <p>It enables better decision-making concerning the overall profitability of products.</p> Signup and view all the answers

    Which of the following is NOT an example of disposal costs?

    <p>Costs for manufacturing new products.</p> Signup and view all the answers

    Which factor is primarily associated with disposal costs?

    <p>Management of waste materials.</p> Signup and view all the answers

    What is likely a consequence of high disposal costs for a business?

    <p>Higher overall operational expenses.</p> Signup and view all the answers

    Which area does NOT typically impact disposal costs?

    <p>Suppliers' pricing strategies.</p> Signup and view all the answers

    What type of costs remain constant per unit when activity changes within the relevant range?

    <p>Variable costs</p> Signup and view all the answers

    How would you categorize transportation costs based on the given information?

    <p>Variable costs</p> Signup and view all the answers

    What is the total variable cost calculated for manufacturing 900 linen shirts daily for 30 days at a cost of $45 per unit?

    <p>$24300</p> Signup and view all the answers

    Which cost category includes material costs and labor according to the information provided?

    <p>Variable costs</p> Signup and view all the answers

    What calculation would you use to determine variable costs based on the provided content?

    <p>Cost per unit x Total number of units</p> Signup and view all the answers

    What is the total variable cost of producing 10,000 refrigerators?

    <p>£5,000,000</p> Signup and view all the answers

    What is the total cost (T.C) of producing 10,000 refrigerators?

    <p>£7,000,000</p> Signup and view all the answers

    How much profit is generated from producing 10,000 refrigerators?

    <p>£3,000,000</p> Signup and view all the answers

    What is the total revenue (T.R) earned from selling 10,000 refrigerators?

    <p>£10,000,000</p> Signup and view all the answers

    What is the breakeven point in units produced for the given data?

    <p>10,000 units</p> Signup and view all the answers

    Study Notes

    Life Cycle Cost

    • Covers costs in all categories of a product's life cycle, from research and development to disposal.
    • Includes first cost, operating and maintenance cost, and disposal cost.

    First Cost

    • Costs associated with purchasing and preparing a product for use.
    • Includes machines, tools, training, installation, tooling and support equipment.

    Operating and Maintenance Cost

    • Costs incurred during the operational phase of a product.
    • Includes material, labor, and overhead costs associated with the system.

    Disposal Costs

    • Costs associated with the disposal of a product at the end of its useful life.
    • Include the cost of dismantling, transporting, and processing waste materials.

    Variable Costs

    • Costs that change with the level of production.
    • Variable cost per unit remains constant as activity changes within the relevant range.
    • Examples include material costs, labor and workforce, fees, commissions, and transportation costs.

    Example Calculation for Variable Costs

    • A company manufactures 900 linen shirts daily.
    • Variable cost per unit for a shirt is $45.
    • Total units produced in 30 days is 18,000 (900 shirts/day x 30 days).
    • Total variable cost for the month is $24,300 ( $45/shirt x 18,000 shirts).
    • Total variable cost is calculated by multiplying the variable cost per unit by the total number of units produced.

    Break-even Analysis

    • Determines the point where revenue equals total costs.
    • This is the point where the company is neither making a profit nor incurring a loss.

    Example Calculation for Break-Even Analysis

    • Fixed costs (F.C.): 2,000,000 pounds.

    • Unit variable cost (U.V.C.): 500 pounds.

    • Selling price (S.P.): 1,000 pounds.

    • Number of units (N): 10,000.

    • Variable costs (V.C.): 5,000,000 pounds (500 pounds/unit x 10,000 units).

    • Total costs (T.C.): 7,000,000 pounds (2,000,000 pounds + 5,000,000 pounds).

    • Total revenue (T.R.): 10,000,000 pounds (1,000 pounds/unit x 10,000 units).

    • Profit: 3,000,000 pounds (10,000,000 pounds - 7,000,000 pounds).

    Break-Even Point

    • The point where total revenue equals total costs.
    • Indicated on a graph where the total revenue line intersects the total cost line.
    • The number of units sold at the break-even point is calculated by dividing fixed costs by the contribution margin per unit (selling price per unit - variable cost per unit).

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    Description

    Test your knowledge on life cycle cost concepts, including first costs, operating and maintenance costs, and disposal costs. This quiz covers various cost categories associated with a product's life cycle from development to disposal.

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