Case Study: Life-Cycle Costing to Enhance AB's Business Performance

This case study examines how AB, a healthcare equipment manufacturer, can improve its business performance through life-cycle costing. The analysis covers assessing future resource requirements, accounting for past and present resource utilization, determining the optimal time for asset renewal, and optimizing maintenance and operational support. By implementing life-cycle costing, AB can make informed decisions regarding equipment purchases, maintenance, and resource allocation to maximize profitability and efficiency. The study highlights the importance of understanding the entire lifespan costs of assets to make strategic decisions, optimize investments, and enhance overall business performance. The study also explores how applying life-cycle costing helps AB identify when machinery needs replacement, optimize maintenance, and ensure effective operation, ultimately leading to profit maximization by minimizing waste and maximizing the efficiency of its production processes.

Running head: LIFE-CYCLE COSTING AND HOW IT CAN HELP IMPROVE THE
BUSINESS PERFORMANCE OF AB 1
Life-cycle costing and how it can help improve the business performance of AB
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LIFE-CYCLE COSTING AND HOW IT CAN HELP IMPROVE THE BUSINESS
PERFORMANCE OF AB 2
Introduction
Life cycle costing is the method of documenting and identifying all the expenses incurred
over the life of a given asset .Analyzing and considering all the expenses incurred in the whole
life of an asset can be useful in decision making. Managers and owners of various assets can use
the information on life-cycle costing to deciding on the acquisition and continuous use of an
asset and its disposal (Love, 2015 p.56). Administrators and proprietors of different resources
can utilize the data on life-cycle costing to choosing the procurement and persistent utilization of
an advantage and its disposal. Life-cycle costing can be helpful in improving the business
execution of AB, which manages the creation of wellbeing gear's both clinical and non-
clinical.Life-cycle costing can be useful in improving the business performance of AB, which
deals with the production of health equipment's both clinical and non-clinical.
Point 1: With life cycle costing AB can be able to assess future resource requirements of
the company
Understanding the future resource required to run the company, AB will work towards
the purchase of durable machinery. For example, this is applied in the manufacturing of clinical
equipment requires complex technology; hence, a massive investment needs to be put in place
(Neugebauer, Forin & Finkbeiner, 2016). Another example, the company produces both clinical
and non-clinical equipment, which both involve different production processes. In this case,
there is a need to come up with clear documentation of the cost involved in putting up this
investment. Also, this will help the company’s top management to make the right decisions in
the purchase of equipment hence maximizing their profit (Bierer, Götze, Meynerts & Sygulla,
2015 p.133). Understanding the future asset required to run the organization, AB will progress in
the direction of the acquisition of sturdy hardware. This is on the grounds that the assembling of

LIFE-CYCLE COSTING AND HOW IT CAN HELP IMPROVE THE BUSINESS
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clinical gear requires complex innovation; consequently, a monstrous venture should be placed
in place. Other than this, the organization produces both clinical and non-clinical gear, which
both includes distinctive generation forms. Because of this, there is a need to think of clear
documentation of the cost associated with setting up this venture. Additionally, this will help the
organization's top administration to settle on the correct choices in the acquisition of hardware
henceforth amplifying their benefit
Point 2: Account for resources utilized now and in the past
By carrying out life-cycle costing, AB will be able to account for funds that have already
been used in the production of health equipment. Through this, the company's management can
be able to calculate the net profit from a given investment (Su, Baird & Schoch 2015p.44).
Besides, it will help in understanding the expected future profit from a given unit of investment.
Also, the company will be able to invest in resources that have a higher profit margin as
compared to others. The investment will, in turn, lead to the right resource investment by the
company hence profit maximization. For example, via doing life-cycle costing, AB will have the
option to represent supports that have just been utilized in the creation of wellbeing gear.
Through this, the organization's administration can have the option to figure the net benefit from
a given venture. Also, it will help in understanding the normal future benefit from a given unit of
speculation.
Point 3: Access when various assets and equipment get to the end of their useful economic
life and if there is a need to renew them.
When the company carries out life-cycle costing it will be able to identify on old
machinery that needs replacement. This type of machinery often attracts a high cost of

LIFE-CYCLE COSTING AND HOW IT CAN HELP IMPROVE THE BUSINESS
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maintenance for them to be efficient in the production process (Buxel, Esenduran & Griffin,
2015 p.110). The slower profit growth in the clinical equipment category can be due to faulty
machines that require regular maintenance. Besides this, through this process, the company can
be able to identify when a skilled workforce needs to be recruited, considering the equipment
involved in the production process requires sophisticated technology. Example, Life-cycle
costing will enable AB to identify the assets that need replacement hence ensuring efficiency in
the production process, which will, in turn, lead to profit maximization (Tetiana et al., 2018
p.49). This sort of apparatus frequently draws in a significant expense of support for them to be
effective in the generation process. The more slow benefit development in the business class can
be because of broken machines that require customary support. Other than this, through this
procedure, the organization can have the option to distinguish when a gifted workforce should be
enlisted, considering the hardware engaged with the creation procedure requires modern
innovation.
Point 4: Optimize maintenance and operational support
The company can make realize the need to effectively use the existing as well as new
resources used in the production process by carrying out life cycle costing. This process of life
cycle costing with helps AB to have a deeper understanding of the requirements of various inputs
over their expected life cycle (Dahlbo et al., 2015 p. 334). The knowledge will assist the
company management in putting appropriate measures in ensuring proper storage to ensure these
products meet their expected life-cycle. Example, both clinical and non-clinical equipment
manufactured by AB Company needs to be stored appropriately to ensure they are of good
quality when getting to the target customers. Besides, through this, the company can ensure
effective maintain ace and operation of the existing machinery used in the production process

LIFE-CYCLE COSTING AND HOW IT CAN HELP IMPROVE THE BUSINESS
PERFORMANCE OF AB 5
(Daddi, Nucci & Iraldo 2017 p.162). The organization can make understand the need to
successfully utilize the current just as new assets utilized in the creation procedure via doing life
cycle costing. This is procedure of life cycle costing with assistance AB to have a more profound
comprehension of the necessities of different contributions over their normal life cycle. The
information will help the organization the executives in placing suitable measures in
guaranteeing legitimate stockpiling to guarantee these items meet their normal life-cycle.
Conclusion
Both clinical and non-clinical gear fabricated by AB organization should be put away
suitably to guarantee they are of good quality when getting to the objective clients. The
optimization process will ensure the company meets the input requirements over its anticipated
life cycle hence ensuring profit maximization by ensuring there is no wastage in the production
process.

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