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Target Costing

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by

Erin Tague

on 17 August 2013

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Transcript of Target Costing

Target Costing: An Alternative Approach to Cost Reduction
by Erin Tague

Target Costing:
An Alternative Approach to Cost Reduction

What is Target Costing
Traditional Cost Reduction Approach
Target Costing Approach
Pros and Cons
Conclusion
Traditional Approach
Market Research
Target Costing Approach
Market Research
Pros and Cons
of Target Costing
What is Target Costing?
Pros
- Customer-driven
- Costs identified early
- Less risk
- Improved customer satisfaction
- Increased ability to compete
Cons
- Not beneficial within service industries
- Length of development cycle
- Lack of cross-functional teamwork
- Employee burnout
- Difficult to implement
Conclusion
- Target Costing is effective
- Not widely known or used in the U.S.
- Is not conducive to service/labor industries
- Is ideal for companies providing consumer goods
Production Specification and Design
Target Selling Price
-
Target Profit
=
Target Cost
Value Engineering
Supplier Cost Reduction
Manufacturing
Continuous Cost Reduction
Product Specification
Design
Engineering
Supplier Pricing
Estimated Cost
=
Expected Selling Price - Estimated Cost
Manufacturing
Periodic Cost Reduction
Sources
"The Target Costing Bull's Eye, Part One of a Series"
Business Finance
http://businessfinancemag.com/bpm/target-costing-bulls-eye-part-one-series

"Target Costing"
Accounting Tools
http://www.accountingtools.com/target-costing

Management Accounting
6th Edition
Atkinson, Kaplan, Matsumura, Young
Full transcript