Background:

SL is a specialist car manufacturer that produces various models of car. The organisation is due to celebrate its 25th anniversary next year. To mark the occasion, SL intends to produce a sports car; the Model S. As this will be a special edition, production will be limited to 1,000 Model S cars. SL is considering using a target costing approach and has conducted market research to determine the features that consumers require in a sports car. Based on this market research and knowledge of competitors products, SL has decided to price the Model S at $24,950. SL requires an operating profit margin of 20% of the selling price of the car. The design and development costs for the car are expected to be very significant.

the Management Accountant of the company has suggested using a life-cycle costing technique for cost planning.

Question:

Explain the essential features of the life-cycle costing and why it may be useful for the company.