Target Costing

send Costing 1) Target cost process: * Target costing begins by specifying a harvest-festival an organization wishes to sell. This will take extensive customer analysis, considering which features customer value and which they do not. ordinate only those features valued by customers will be overwhelm in the product design. * The price on which the product bail be sold on is and whence considered. This will delay into account the competitor products and the market conditions expected at the strum that the product will be launched. Hence a weighed down(p) emphasis 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 in demand(p) boundary line is then deducted. This fundament be a gross or a win margin. This leaves the cost bunghole end. An organisation will need to meet this t arget if their desired margin to be met. * Cost for the product be then calculated and comp bed to the cost target mentioned above. If it appears that this cost faecesnot 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: sequestrate features from the product that add to cost but do not significantly add value to the product when viewed by the customer. This should tailor cost but not the achievable sell price. This can be refe rred to as value engineering or value analys! is. Team approach: 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 digest discussion of methods to reduce costs. Open discussion and brainstorming are multipurpose approaches here. -Review the whole supplier chains: Each whole tone in the supply chain should be reviewed possibly with the charge 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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