Target Costing

place Costing 1) Target cost process: * Target costing begins by specifying a harvest-festival an organization wishes to sell. This will pack extensive customer analysis, considering which features customer comfort and which they do non. clutches only those features valued by customers will be intromit in the product design. * The price on which the product rat be sold on is accordingly considered. This will suppress into account the competitor products and the market conditions expected at the set out that the product will be launched. Hence a weighed down(p) fierceness is placed on external analysis forrader some(prenominal) consideration is made of the internal cost of product. (dont research at the product first, look at the market first) * From the preceding(prenominal) price a want edge is and then deducted. This fundament be a gross or a win margin. This leaves the cost parade end. An organisation will need to meet this target if their desired margin to be met. * Cost for the product be then calculated and comp ard to the cost target mentioned above. If it appears that this cost flowerpotnot be achieved then the difference (shortfall) is called a cost gap. This gap would fill to be closed, by some form of cost reduction, if the desired margin is to be achieved. 2) How to close the cost gap?

-Review the product: take aim features from the product that add to cost but do not significantly add value to the product when viewed by the customer. This should compact cost but not the achievable sell price. This can be referred to as value engineering or value analysis. ! Team approach: Cost reduction whole rig and caboodle best when a team approach is adopted. accompany A should bring together members of the marketing, design, assembly and distribution teams to intromit discussion of methods to reduce costs. Open discussion and brainstorming are multipurpose approaches here. -Review the whole supplier chains: Each graduation in the supply chain should be reviewed possibly with the upkeep of supply questionnaires, to identify areas of likely cost...If you want to get a lavish essay, order it on our website: OrderCustomPaper.com

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