ExpertEasy2 marksMultiple Choice
ACCA · Question 16 · Cost Accounting Techniques
A pharmaceutical company is applying life-cycle costing to a new drug. Which TWO of the following costs are typically incurred heavily during the pre-production phase of the product life cycle?
A pharmaceutical company is applying life-cycle costing to a new drug. Which TWO of the following costs are typically incurred heavily during the pre-production phase of the product life cycle?
Answer options:
A.
Research and development costs.
B.
Routine manufacturing labor costs.
C.
Prototype testing costs.
D.
Decommissioning and disposal costs.
How to approach this question
Identify costs that happen before the product is launched to the market.
Full Answer
Life-cycle costing tracks costs from inception to abandonment. Pre-production costs include R&D, design, and prototype testing. Manufacturing costs occur during the growth/maturity phases, and decommissioning occurs at the decline/end-of-life phase.
Common mistakes
Selecting manufacturing costs, assuming they are part of the 'setup' phase.
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