|life cycle costing|
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Definition of life cycle costing
life cycle costing
the accumulation of costs for activities that
An approach to costing that estimates and accumulates the costs of a product/service over
A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.
a cost accumulation and reporting
A methodology under which all manufacturing costs are assigned
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
A relatively new method advocated for the
a process using multiple cost drivers to predict and allocate costs to products and services;
A cost allocation system that compiles costs and assigns
an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute
Also referred to as the weighted-average life (WAL). The average number of years that each
a streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires
The annual period over which budgets are prepared.
Repetitive cycles of economic expansion and recession.
Fluctuations of GDP around its long-run trend, consisting of recession, trough, expansion, and peak.
An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.
Cash conversion cycle
The length of time between a firm's purchase of inventory and the receipt of cash
cash conversion cycle
Period between firm’s payment for materials
In general, the time between cash disbursement and cash collection. In net working capital
The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials.
The frequent, scheduled counting of a subset of all inventories,
the time between the placement of an order to
Deferred nominal life annuity
A monthly fixed-dollar payment beginning at retirement age. It is nominal
see variable costing
A costing methodology that only assigns direct labor and material costs
The period over which a company expects to be able to use an asset.
An expiration cycle relates to the dates on which options on a particular security expire. A
FIFO method (of process costing)
the method of cost assignment that computes an average cost per equivalent
First in, first-out costing method (FIFO)
A process costing methodology that assigns the earliest
see absorption costing
Group Life Insurance
This is a very common form of life insurance which is found in employee benefit plans and bank mortgage insurance. In employee benefit plans the form of this insurance is usually one year renewable term insurance. The cost of this coverage is based on the average age of everyone in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
hybrid costing system
a costing system combining characteristics
A method of accounting that accumulates the costs of a product/service that is produced either
job order costing system
a system of product costing used
Joint Policy Life
One insurance policy that covers two lives, and generally provides for payment at the time of the first insured's death. It could also be structured to pay on second death basis for estate planning purposes.
The process of continual cost reduction that occurs after a product
Level Premium Life Insurance
This is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.
The average number of years of life remaining for a group of people of a given age and gender according to a particular mortality table.
Life Income Fund
Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement Income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.
Insurance that provides protection against an economic loss caused by death of the person insured.
Life Insurance (Credit Insurance)
Group Term life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.
The person who's life is protected by an individual policy.
manufacturing cycle efficiency (MCE)
a ratio resulting from dividing the actual production time by total lead time;
The period between the 2 latest highs or lows of the S&P 500, showing net performance of a
modified FIFO method (of process costing)
the method of cost assignment that uses FIFO to compute a cost per
Mortgage Life insurance (Credit Insurance)
Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.
The average time intervening between the acquisition of materials or services and the final
The period of service for which a company compensates its employees.
Political Business Cycle
A business cycle caused by policies undertaken to help a government be re-elected.
A method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced.
A costing methodology that arrives at an individual product cost through the calculation of average costs for large quantities of identical products.
process costing system
a method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products;
The time it takes to bring new and/or improved products to market.
product life cycle
a model depicting the stages through
Real Business Cycle Theory
Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.
a process that compares, to the extent possible
The frequency with which an asset is replaced by an equivalent asset.
The time period during which inventory can be retained in stock and beyond
Shelf life control
Deliberate usage of the oldest items first, in order to avoid exceeding
Split Dollar Life Insurance
The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. There is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.
strict FIFO method (of process costing)
the method of cost assignment that uses FIFO to compute a cost per equivalent unit and, in transferring units from a department, keeps the
A method of costing that is concerned with managing whole-of-life costs of a product/service during the product design phase – the difference between target price (to achieve market share) and the target profit margin.
a method of determining what the cost of a
Temporary Life Insurance
Temporary insurance coverage is available at time of application for a life insurance policy if certain conditions are met. Normally, temporary coverage relates to free coverage while the insurance company which is underwriting the risk, goes through the process of deciding whether or not they will grant a contract of coverage. The qualifications for temporary coverage vary from insurance company to insurance company but generally applicants will qualify if they are between the ages of 18 and 65, have no knowledge or suspicions of ill health, have not been absent from work for more than 7 days within the prior 6 months because of sickness or injury and total coverage applied for from all sources does not exceed $500,000. Normally a cheque covering a minimum of one months premium is required to complete the conditions for this kind of coverage. The insurance company applies this deposit towards the cost of a policy at its issue date, which may be several weeks in the future.
A product that provides life coverage for a specified duration typically not beyond the age of 75.
Term life insurance
A contract that provides a death benefit but no cash build-up or investment component.
Term Life Insurance
A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.
A whole life insurance product whose investment component pays a competitive interest rate
An unbundled life product with a separate investment component. It typically does not participate in companies profits.
The estimated life span of a fixed asset, during which it can be expected to
A method of costing in which only variable production costs are treated as product costs and in which all fixed (production and non-production) costs are treated as period costs.
a cost accumulation and reporting method
Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the
Weighted average life
weighted average method (of process costing)
the method of cost assignment that computes an average cost per
Component that provides life coverage during the insured's life.
Whole life insurance
A contract with both insurance and investment components: (1) It pays off a stated
A method of costing that involves making continual, incremental improvements to the
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