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  • Target Costing

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    Rahul Pandey
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    The document discusses target costing, which is a technique used to determine the target product cost based on the sale price and gross margin percentage set by management. It describes how target costing structures costs into direct and indirect categories. It also outlines techniques for reducing costs such as value engineering, kaizen costing, and activity-based management. Finally, it provides an example comparing cost-plus pricing to target costing for a company bidding on an automotive contract.

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    The document discusses target costing, which is a technique used to determine the target product cost based on the sale price and gross margin percentage set by management. It describes how target costing structures costs into direct and indirect categories. It also outlines techniques for reducing costs such as value engineering, kaizen costing, and activity-based management. Finally, it provides an example comparing cost-plus pricing to target costing for a company bidding on an automotive contract.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Als PPTX, PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    836 Ansichten9 Seiten

    Target Costing

    Hochgeladen von

    Rahul Pandey
    The document discusses target costing, which is a technique used to determine the target product cost based on the sale price and gross margin percentage set by management. It describes how target costing structures costs into direct and indirect categories. It also outlines techniques for reducing costs such as value engineering, kaizen costing, and activity-based management. Finally, it provides an example comparing cost-plus pricing to target costing for a company bidding on an automotive contract.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Als PPTX, PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    von 9

    Target Costing

    Presented By : Rahul Pandey (1033) Reshu Varshney (1034)

    Target Costing

    Target Cost Analysis


    Existing Cost Structure Price (set by market) Gross margin (set by management) Part A

    Part B
    Part C
    Direct labor

    Target Cost Structure


    Part A Part C Direct Labor Indirect Cost 2 Indirect Cost 3 Indirect Cost 4

    Target Product Cost (Price-Gross Margin)

    Indirect cost1 Indirect cost 2 Indirect cost 3 Indirect cost 4

    TECHNIQUES OF COST REDUCTION


    Value

    engineering (during design and development) Kaizen costing (during production) Activity-Based Management (during all stages of product life)

    EXAMPLE
    ITT Automotive receives invitation from ford to bid on the ABS to be used in a new model car Estimated current manufacturing cost = $154 Gross margin rate = 30% on sales Highly competitive market Sale price = $200 per unit

    COST-PLUS PRICING

    Let x be the price 70% of price = actual cost 70x/100 = 154 X = $220 Rejection of bid

    TARGET COSTING
    As 70% of price = actual cost Sale price = $200 Target cost = 70% of 200 = $140 Required cost reduction = $154-$140 = $14 If commitment for cost reduction, company can bid at $200

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