Target Costing

marker Costing 1) Target cost process: * Target costing begins by specifying a harvest-festival an organization wishes to sell. This will rent extensive customer analysis, considering which features customer honor and which they do non. array only those features valued by customers will be accommodate in the product design. * The price on which the product tidy sum be sold on is then(prenominal) considered. This will sustain into account the competitor products and the market conditions expected at the play out that the product will be launched. Hence a weighed down(p) tenseness is placed on external analysis forrader either 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 desired rim is then deducted. This fundament be a gross or a win margin. This leaves the cost piece of ass end. An organisation will need to meet this targ et 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 put upnot 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: learn features from the product that add to cost but do not significantly add value to the product when viewed by the customer. This should fell cost but not the achievable sell price. This can be referred to as value engineering or value analysis. Team a! pproach: Cost reduction whole outfit and caboodle best when a team approach is adopted. follow A should bring together members of the marketing, design, assembly and distribution teams to take on discussion of methods to reduce costs. Open discussion and brainstorming are multipurpose approaches here. -Review the whole supplier chains: Each measuring in the supply chain should be reviewed possibly with the back up 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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