Anticipated future expenses that have not yet taken place are referred to as ___________?
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Answer: A. designed-in costs
Explanation
Designed-in costs, also known as locked-in costs, are anticipated future expenses determined largely by initial product design choices. Once an engineer selects materials and manufacturing methods during the design phase, most future costs become locked in. Thus, these anticipated expenses are accurately classified as designed-in costs. Research shows that up to eighty percent of a product's manufacturing costs are locked in during the design stage. Making changes later in the production lifecycle becomes exponentially more expensive. Therefore, controlling designed-in costs early is vital for long-term profitability.
Value engineering and target costing techniques are used during product design to minimize locked-in expenses. Focusing on cost reduction before manufacturing begins prevents expensive redesigns later. Value-added costs represent expenditures that enhance customer satisfaction rather than just anticipated future design outlays. Both options a and b correctly identify this locked-in design cost concept.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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