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  • Establishing The Target Cost

    Încărcat de

    ewinze
    34 vizualizări7 pagini
    The target costing process has two stages: establishing the target cost during product planning and concept development, and achieving the target cost during design and later stages through value engineering and continuous improvement. To establish the target cost, companies determine the product and target market, introduce a concept or prototype, set a selling price acceptable to customers that can withstand competition, and determine the required profit based on return on sales and industry averages. The target cost is then calculated as the selling price minus the desired total profit over the product life cycle.

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    Establishing the Target Cost

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    The target costing process has two stages: establishing the target cost during product planning and concept development, and achieving the target cost during design and later stages through value engineering and continuous improvement. To establish the target cost, companies determine the product and target market, introduce a concept or prototype, set a selling price acceptable to customers that can withstand competition, and determine the required profit based on return on sales and industry averages. The target cost is then calculated as the selling price minus the desired total profit over the product life cycle.

    Drepturi de autor:

    © All Rights Reserved
    Descărcați ca PPT, PDF, TXT sau citiți online pe Scribd
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    34 vizualizări7 pagini

    Establishing The Target Cost

    Încărcat de

    ewinze
    The target costing process has two stages: establishing the target cost during product planning and concept development, and achieving the target cost during design and later stages through value engineering and continuous improvement. To establish the target cost, companies determine the product and target market, introduce a concept or prototype, set a selling price acceptable to customers that can withstand competition, and determine the required profit based on return on sales and industry averages. The target cost is then calculated as the selling price minus the desired total profit over the product life cycle.

    Drepturi de autor:

    © All Rights Reserved
    Descărcați ca PPT, PDF, TXT sau citiți online pe Scribd
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    din 7

    Target Costing Process

    Two stage process

    Establish the target cost

    Market research

    Product planning, concept development stages

    Achieve the target cost

    Value engineering, continuous improvement

    Design stage

    Continuous improvement in later stages


    1

    Establishing the Target Cost

    Determine the product and its market

    Who is the target market?

    What do they want?

    What do competitors offer?

    Introduce concept or prototype

    Evolutionary or revolutionary?

    Refine until it meets customer needs


    2

    Establishing the Target Cost

    Determine the selling price

    Must be acceptable to the customer

    Must be able to withstand competition

    Techniques

    Existing price +/- value of features added or deleted

    Consensus of focus group

    Price predicted to achieve a desired market share

    Establishing the Target Cost

    Determine the required profit

    Return on sales

    Desired return

    Historical return for similar products

    Industry average for similar products

    Return on sales will fluctuate over the life of the


    product

    Price and costs fluctuate


    4

    Unit Selling Price

    Establishing the Target Cost

    Product Life Stage


    5

    Establishing the Target Cost


    Gradual decline as volume
    increases

    Unit Cost

    Competitors enter market,


    straining supply of resources
    Unexpected events affect
    cost of resources

    Product Life Stage


    6

    Establishing the Target Cost

    Unit price, cost and profit are almost


    meaningless because they fluctuate

    Life cycle totals are more meaningful


    Total expected revenue throughout product life
    - Total desired profit throughout product life
    Total target cost

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