Life-Cycle Costing Using Activity-Based Costing and Monte Carlo Methods to Manage Future Costs and Risks

Most cost management efforts concern understanding the past but this book focuses on future costs, their uncertainties, and risks. It presents a new approach toward life-cycle costing based on the principles of activity-based costing, uncertainty and risk management and Monte Carlo methods.

Manage costs before they occur

"Traditional cost cutting has always had a backward focus and created lots of negative reactions–both rational and irrational. In his new book, Jan Emblemsvag introduces a new forward looking life-cycle approach to cost management. Employing foresight instead of hindsight puts the focus on processes, uncertainty and risks, and future value creation.

"The author’s strong side–besides having a good holistic concept–is the ability to express himself accurately and clearly on very complicated and sophisticated theory. Managers, consultants, and others with interest in cost management will be enlightened and inspired by the book–and no doubt find it of great help in applying the methods and processes that are presented.

"The idea of turning uncertainty into an asset for managers is quite unique. Making budgeting less data-oriented and more risk-oriented is another good idea. The next step now is to make operative approaches and apply the theory in practical situations!"
–John-Erik Stenberg
Considium Consulting Group AS

"This book skillfully combines the ideas of life-cycle costing and activity-based costing to come up with an approach to effectively manage costs in an uncertain environment."
–Dr. Arnold Schneider
Professor of Accounting
Georgia Institute of Technology

Life-Cycle Costing (LCC), a cost projection method typically associated with engineering, allows for the accurate prediction of the total costs a product will incur throughout its life-cycle. Meshing this technique with activity-based costing, risk management, and Monte Carlo analytical methods, Jan Emblemsvåg offers a broad range of businesses a new, more effective approach to cost management in Life-Cycle Costing.

By introducing uncertainty into its models, "Activity-Based LCC" offers managers the clarity of hindsight before costs are actually incurred. Among other features, Life-Cycle Costing includes:

• Three case studies that demonstrate how Activity-Based LCC affords superior cost management
• A step-by-step guide to LCC methodology
• Definitions of key terms
• A discussion of activity-based costing and risk management fundamentals
• An appendix with examples of Monte Carlo methods

Life-Cycle Costing provides controllers and cost managers an insider’s look at the next generation of cost management techniques.