A pharmaceutical company is applying life-cycle costing to a new drug. Which TWO of the following costs are typically incurred heavily during the pre-production phase of the product life cycle?

Answer options:

Research and development costs.

Routine manufacturing labor costs.

Prototype testing costs.

Decommissioning and disposal costs.

How to approach this question

Identify costs that happen before the product is launched to the market.

Full Answer

Life-cycle costing tracks costs from inception to abandonment. Pre-production costs include R&D, design, and prototype testing. Manufacturing costs occur during the growth/maturity phases, and decommissioning occurs at the decline/end-of-life phase.

Common mistakes

Selecting manufacturing costs, assuming they are part of the 'setup' phase.

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