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Questions and Answers
Which of the following components is not included in the First Cost of Life-Cycle Cost?
Which element is associated with the Operating and Maintenance cost in the Life-Cycle Cost framework?
Which of the following is considered part of the First Cost in Life-Cycle Cost analysis?
In the context of Life-Cycle Cost, which option consists solely of initial investment costs?
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Which of these costs is least likely to be categorized under Operating and Maintenance costs?
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What is the primary focus of a product life-cycle in relation to costs?
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Which of the following components is NOT typically considered within the life-cycle cost concept?
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In the context of life-cycle costs, which of the following is true?
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Which statement best describes the term 'life cycle cost'?
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What do disposal costs specifically refer to?
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Why is understanding life-cycle costs important for engineers?
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Which of the following is NOT an example of disposal costs?
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Which factor is primarily associated with disposal costs?
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What is likely a consequence of high disposal costs for a business?
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Which area does NOT typically impact disposal costs?
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What type of costs remain constant per unit when activity changes within the relevant range?
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How would you categorize transportation costs based on the given information?
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What is the total variable cost calculated for manufacturing 900 linen shirts daily for 30 days at a cost of $45 per unit?
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Which cost category includes material costs and labor according to the information provided?
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What calculation would you use to determine variable costs based on the provided content?
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What is the total variable cost of producing 10,000 refrigerators?
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What is the total cost (T.C) of producing 10,000 refrigerators?
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How much profit is generated from producing 10,000 refrigerators?
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What is the total revenue (T.R) earned from selling 10,000 refrigerators?
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What is the breakeven point in units produced for the given data?
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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
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Fixed costs (F.C.): 2,000,000 pounds.
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Unit variable cost (U.V.C.): 500 pounds.
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Selling price (S.P.): 1,000 pounds.
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Number of units (N): 10,000.
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Variable costs (V.C.): 5,000,000 pounds (500 pounds/unit x 10,000 units).
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Total costs (T.C.): 7,000,000 pounds (2,000,000 pounds + 5,000,000 pounds).
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Total revenue (T.R.): 10,000,000 pounds (1,000 pounds/unit x 10,000 units).
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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.
