Medium2 marksMultiple Choice

Specialist cost and management accounting techniquesLife Cycle CostingSection B

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Section B - Case 1: VoltCell Manufacturing

VoltCell is a heavy manufacturing and tech company that produces advanced solid-state batteries for electric vehicles. The company is evaluating a new battery model, the 'QuantumCell', which has an expected life cycle of 4 years.

The estimated costs over the life cycle are as follows:

Research and Development: $4,500,000
Product Design and Testing: $1,500,000
Manufacturing costs: $250 per unit
Marketing and Distribution: $2,000,000 total over 4 years
End-of-life recycling and disposal costs: $1,000,000

VoltCell expects to produce and sell a total of 100,000 units of the QuantumCell over its 4-year life cycle.

Calculate the total life cycle cost per unit for the QuantumCell. (Enter the numerical value only)

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ACCA · Question 17 · Specialist cost and management accounting techniques

Section B - Case 1: VoltCell Manufacturing

VoltCell is a heavy manufacturing and tech company that produces advanced solid-state batteries for electric vehicles. The company is evaluating a new battery model, the 'QuantumCell', which has an expected life cycle of 4 years.

Management wants to maximize the return over the life cycle of the QuantumCell.

Which TWO of the following strategies would be most effective in maximizing the life cycle return during the design and development phase?

Answer options:

Designing the battery to use standardized components to reduce future manufacturing complexity.

Increasing the marketing budget in year 3 to extend the maturity phase.

Minimizing the time to market to maximize the sales window before competitors launch similar products.

Offering heavy discounts to clear inventory at the end of the product's life.

How to approach this question

Focus specifically on actions that can be taken *before* the product is launched (during design/development) that impact the whole life cycle.

Full Answer

In life cycle costing, the majority of costs are 'locked in' during the design phase. Therefore, designing out costs (e.g., using standardized parts) is crucial (Option A). Additionally, minimizing time to market ensures the product has the longest possible sales window to recover its heavy R&D investments (Option C). Options B and D occur much later in the life cycle.

Common mistakes

Selecting options that are good strategies generally, but failing to note the constraint that they must occur during the *design* phase.

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Practice the full ACCA PM — Performance Management Practice Exam 4

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Practice the full ACCA PM — Performance Management Practice Exam 4

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