Dictionary of Accounting Terms: whole-life cost
whole-life cost
concept closely associated with life-cycle costingWhole-life costs equal life-cycle costs plus after-purchase costs.Attention to the reduction of all whole-life costs through analysis and management of all value-chain activities is a powerful competitive tool because of the potential for increasing customer satisfaction. Life-cycle and whole-life cost concepts are associated with target costing and target pricing. A firm may determine that market conditions require that a product sell at a given target price. Hence, a target costcan be determined by subtracting the desired unit profit margin from the target price. The cost reduction objectives of life-cycle and whole-life cost management can, therefore, be determined using target costing.
