SlideShare uma empresa Scribd logo
1 de 14
Baixar para ler offline
Target Costing



           By:
           Sainatth Wagh
Definition


 Target Costing (TC) is defined as a cost management tool for reducing the
 overall cost of product over its entire life cycle with the help of the
 production, engineering, R&D…..




Intent of target costing

Reduction in cost
Planning & designing high quality products
Meeting customers needs
Using value engineering to target cost
Attain target cost using standard cost
TC which can enable attain desirable market share
Nature of Target Costing


         Design
       Type of Product

                                   Cost
   Technical Specification


   Technical Requirements


      Customers Needs
                                   Market
Resource Consumption (Acq Price)   Price
Target Costing

Price led                      Cross-functional
 costing                           teams
                    Key
Life-cycle      principles       Value-chain
   costs         of target       orientation
                 costing
   Focus on                    Focus on
   process                      product
    design       Focus          design
                 on the
                customer
Target costing-Methods


1. Subtraction Method
Based on competitors’ price, where the target cost is worked backwards from
the market price. The target result may represent a very rigorous target and may
be difficult to achieve.


2. Addition Method
Based on the existing technology and past cost data of the company. It is
achievable but ignores Market Conditions.


3 Integrated Method

Integration of Subtraction & Addition Methods
Steps in Target Costing-Summary


                                                    Value added
                                 Product            By each
     Customer
                               Performance          Feature &
      Needs                      Features
                                                    Component




                                             Choose a product Design
                              Choose         With assured target profit
     Choose                                  Cost target for each
                           Manufacturing
Suppliers assuring                           component
                          Design assuring
   Target cost
                            target costs



                                                 Monitor
                     Conduct VE to               Product performance
Cost Review          Reduce Target Costs         Cost & Profit
                                                 Target Price
Achieving the Target Cost- Ex. Pump

EXHIBIT 1
CUSTOMER REQUIREMENT RANKINGS

                                   Less        Ranking      More    Raw         % of Total     Competitive
            Customer Requirement   Important            Important   Score       Raw Score      Comparison
                                     1       2    3    4     5                               1 2 3 4 5
Multiple speeds                                        4                    4       14.8%
Horizontal oscillation                            3                         3       11.1%
Vertical oscillation                 1                                      1        3.7%
Light weight                                           4                    4       14.8%
Adjustable height                    1                                      1        3.7%
Airflow capacity                                       4                    4       14.8%
Quietness                                                    5              5       18.5%
Compact size                                      3                         3       11.1%
Looks nice                                   2                              2        7.4%

Total                                                                   27          100%

                                                                                               Us
                                                                                               Competitor
                                                                                               Both
Achieving the Target Cost- Ex. Pump


EXHIBIT 2
COST GAP BREAKDOWN BY LIFE CYCLE AND VALUE CHAIN

                                                              Value Chain
        Life Cycle                 Internal Costs            External Costs                  Total Costs
                           Target      Current    Gap Target    Current     Gap    Target      Current   Gap
Research and development $ 0.30 $ 0.50 $ 0.20                                     $ 0.30      $ 0.50 $ 0.20
Manufacturing                 4.00        5.00     1.00 $ 13.00 $ 15.00 $    2.00    17.00       20.00    3.00
Marketing and distribution    1.50        2.00     0.50    4.50    5.00      0.50     6.00         7.00   1.00
Service and support           0.25        0.50     0.25                               0.25         0.50   0.25
General administration        0.75        1.00     0.25                               0.75         1.00   0.25

Total                   $   6.80 $    9.00 $   2.20 $ 17.50 $ 20.00 $        2.50 $ 24.30 $ 29.00 $       4.70
Achieving the Target Cost- Ex. Pump


EXHIBIT 3
COMPONENT COST BREAKDOWN

                                                                                  Percent of
        Component                         Function                     Cost       total cost
Motor                  Turns blade                                 $          8         40%
Transmission           Provides oscillation capabilities                      4         20%
Speed control/switch   Controls blade speed                                   3         15%
Body                   Houses motor, transmission, speed control              2         10%
Blade                  Moves air                                              1          5%
Blade guard            Protects blade from contacting objects                 2         10%

Total                                                              $      20          100%
Achieving the Target Cost- Ex. Pump

EXHIBIT 4
QUALITY-FUNCTION-DEPLOYMENT (QFD) MATRIX

                                                           Components
   Customer Requirements                              Speed                        Blade
                               Motor   Transmission   control       Body   Blade   guard
Multiple speeds
Horizontal oscillation
Vertical oscillation
Light weight
Adjustable height
Airflow capacity
Quietness
Compact size
Looks nice

      Strong correlation
      Moderate correlation
      Weak correlation
Achieving the Target Cost- Ex. Pump

EXHIBIT 5
COMPONENT CONTRIBUTION TO CUSTOMER REQUIREMENTS

                                                                                       Components
            Customer Requirements                                               Speed                                                    Blade
                                          Motor           Transmission          control             Body               Blade             guard
Multiple speeds                        40 X 14.8 = 5.92                      60 X 14.8 = 8.88
Horizontal oscillation                                    80 X 11.1 = 8.88                      20 X 11.1 = 2.22
Vertical oscillation                                       80 X 3.7 = 2.96                       20 X 3.7 = 0.74
Light weight                          70 X 14.8 = 10.36   10 X 14.8 = 1.48                      20 X 14.8 = 2.96
Adjustable height                                                                               100 X 3.7 = 3.70
Airflow capacity                       50 X 14.8 = 7.40                                                             50 X 14.8 = 7.40
Quietness                              40 X 18.5 = 7.40                                                            60 X 18.5 = 11.10
Compact size                            5 X 11.1 =0.56     5 X 11.1 =0.56                       30 X 11.1 =3.33      30 X 11.1 =3.33   30 X 11.1 =3.33
Looks nice                                                                                      50 X 7.4 = 3.70                        50 X 7.4 = 3.70

Total contribution percentage                  31.64%             13.88%              8.88%             16.65%              21.83%               7.03%




 Contribution weight assigned to the component (Correlation) X Importance to the
 customer (Raw Score from Exhibit 1)
Achieving the Target Cost- Ex. Pump

EXHIBIT 6
CALCULATION OF VALUE INDICES FOR COMPONENTS

                 Percent of     Contribution
    Component    Total Cost     Percentage     Value        Action
                 (Exhibit 3)     (Exhibit 5)   Index       Implied
Motor                     40%         31.64%      1.26   Reduce cost
Transmission              20%         13.88%      1.44   Reduce cost
Speed control             15%          8.88%      1.69   Reduce cost
Body                      10%         16.65%      0.60   Improve
Blade                      5%         21.83%      0.23   Improve
blade guard               10%          7.03%      1.42   Reduce cost
Make the Decision

                                         Begin


                                 Value engineering



      Repeat                            Achieve
Yes              No    Close    No
       value                             target
                      enough?
      engr.?                             cost?

                          Yes               Yes
          No


       Abort
      project


                                     Release design
                                     for production
Thank You

Mais conteúdo relacionado

Mais procurados

Accounts : Marginal Costing
Accounts : Marginal CostingAccounts : Marginal Costing
Accounts : Marginal CostingSanchit
 
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...RajaKrishnan M
 
Cost & management accounting
Cost & management accountingCost & management accounting
Cost & management accountinganu singh
 
Price level Accounting
Price level AccountingPrice level Accounting
Price level AccountingAijaz Aryan
 
Accounting for price level changes ppt
Accounting for price level changes pptAccounting for price level changes ppt
Accounting for price level changes pptAshish Siddiqui
 
Methods and techniques of Costing
Methods and techniques of CostingMethods and techniques of Costing
Methods and techniques of CostingAshwin Showi
 
Target costing presentation_final(2)
Target costing presentation_final(2)Target costing presentation_final(2)
Target costing presentation_final(2)Akshay Karnatak
 
Net income approach
Net income approachNet income approach
Net income approachJOYAL SAJI
 
Kaizen costing
Kaizen costing Kaizen costing
Kaizen costing GursharanG
 
Responsibility center mcs ch.4
Responsibility center mcs ch.4Responsibility center mcs ch.4
Responsibility center mcs ch.4Citra Dewi
 
Cost audit meaning, importance, objectives, phases
Cost audit meaning, importance, objectives, phasesCost audit meaning, importance, objectives, phases
Cost audit meaning, importance, objectives, phasesDr. Ankita Chaturvedi
 
Cost accounting
Cost accountingCost accounting
Cost accountingEkta Patel
 

Mais procurados (20)

Accounts : Marginal Costing
Accounts : Marginal CostingAccounts : Marginal Costing
Accounts : Marginal Costing
 
CVP Analysis
CVP AnalysisCVP Analysis
CVP Analysis
 
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...
Management Accounting - Meaning, Definition, Characteristics, Scope, Objectiv...
 
Marginal costing
Marginal costingMarginal costing
Marginal costing
 
Cost & management accounting
Cost & management accountingCost & management accounting
Cost & management accounting
 
Price level Accounting
Price level AccountingPrice level Accounting
Price level Accounting
 
ABC costing
ABC costing ABC costing
ABC costing
 
Accounting for price level changes ppt
Accounting for price level changes pptAccounting for price level changes ppt
Accounting for price level changes ppt
 
Methods and techniques of Costing
Methods and techniques of CostingMethods and techniques of Costing
Methods and techniques of Costing
 
Cost accounting
Cost accountingCost accounting
Cost accounting
 
Target costing presentation_final(2)
Target costing presentation_final(2)Target costing presentation_final(2)
Target costing presentation_final(2)
 
Process costing
Process costingProcess costing
Process costing
 
Net income approach
Net income approachNet income approach
Net income approach
 
Kaizen costing
Kaizen costing Kaizen costing
Kaizen costing
 
Activity-Based Costing System
Activity-Based Costing SystemActivity-Based Costing System
Activity-Based Costing System
 
Strategic Cost Management
Strategic Cost ManagementStrategic Cost Management
Strategic Cost Management
 
Responsibility center mcs ch.4
Responsibility center mcs ch.4Responsibility center mcs ch.4
Responsibility center mcs ch.4
 
Cost audit meaning, importance, objectives, phases
Cost audit meaning, importance, objectives, phasesCost audit meaning, importance, objectives, phases
Cost audit meaning, importance, objectives, phases
 
Leverages
LeveragesLeverages
Leverages
 
Cost accounting
Cost accountingCost accounting
Cost accounting
 

Destaque

Target cost in tata nano (Cost Accounting)
Target cost in tata nano (Cost Accounting)Target cost in tata nano (Cost Accounting)
Target cost in tata nano (Cost Accounting)Masud Kamrul
 
New product devlopment process of TATA NANO
New product devlopment process of TATA NANONew product devlopment process of TATA NANO
New product devlopment process of TATA NANOMehul Rasadiya
 
The future of microfinance in india
The future of microfinance in indiaThe future of microfinance in india
The future of microfinance in indiasatrujeetsahoo
 
Private equity PPT
Private equity  PPTPrivate equity  PPT
Private equity PPTVijay Mehta
 

Destaque (7)

Target costing
Target costingTarget costing
Target costing
 
Target cost in tata nano (Cost Accounting)
Target cost in tata nano (Cost Accounting)Target cost in tata nano (Cost Accounting)
Target cost in tata nano (Cost Accounting)
 
New product devlopment process of TATA NANO
New product devlopment process of TATA NANONew product devlopment process of TATA NANO
New product devlopment process of TATA NANO
 
The Making Of Tata Nano
The Making Of Tata NanoThe Making Of Tata Nano
The Making Of Tata Nano
 
The future of microfinance in india
The future of microfinance in indiaThe future of microfinance in india
The future of microfinance in india
 
Target Costing
Target CostingTarget Costing
Target Costing
 
Private equity PPT
Private equity  PPTPrivate equity  PPT
Private equity PPT
 

Semelhante a Target costing

Driving a Culture of Profitability into Your Sales Organization
Driving a Culture of Profitability into Your Sales OrganizationDriving a Culture of Profitability into Your Sales Organization
Driving a Culture of Profitability into Your Sales OrganizationVendavo
 
Performance report sample
Performance report samplePerformance report sample
Performance report sampleSekighenda
 
ROI Demystified WOMMA Summit 2010
ROI Demystified WOMMA Summit 2010ROI Demystified WOMMA Summit 2010
ROI Demystified WOMMA Summit 2010stuartsheldon
 
LeanCOST: the smartest costing solution
LeanCOST: the smartest costing solutionLeanCOST: the smartest costing solution
LeanCOST: the smartest costing solutionMargherita Peruzzini
 
Social Benefit Analysis of Modern Wholesale Markets
Social Benefit Analysis of Modern Wholesale MarketsSocial Benefit Analysis of Modern Wholesale Markets
Social Benefit Analysis of Modern Wholesale MarketsKomal03
 
Co pa power point
Co pa power pointCo pa power point
Co pa power pointkrnprjp
 
Ifs kaizen costing and value analysis
Ifs kaizen costing and value analysisIfs kaizen costing and value analysis
Ifs kaizen costing and value analysismanucprince
 
Evaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkotEvaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkotBabasab Patil
 
Evaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkotEvaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkotBabasab Patil
 
Akuntansi keuangan aktiva tetap
Akuntansi keuangan aktiva tetapAkuntansi keuangan aktiva tetap
Akuntansi keuangan aktiva tetapjoni201112281
 
Buying Into The Budget
Buying Into The BudgetBuying Into The Budget
Buying Into The Budgetjdparfett
 
Operations Strategies of EasyJet vs Virgin Atlantic
Operations Strategies of EasyJet vs Virgin AtlanticOperations Strategies of EasyJet vs Virgin Atlantic
Operations Strategies of EasyJet vs Virgin AtlanticRonantonnoel
 
Cost Management Powerpoint Presentation Slides
Cost Management Powerpoint Presentation SlidesCost Management Powerpoint Presentation Slides
Cost Management Powerpoint Presentation SlidesSlideTeam
 
Marketing Plan
Marketing PlanMarketing Plan
Marketing Plantienle07
 
Cost Management PowerPoint Presentation Slides
Cost Management PowerPoint Presentation SlidesCost Management PowerPoint Presentation Slides
Cost Management PowerPoint Presentation SlidesSlideTeam
 
What Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost ManagementWhat Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost Managementalanlund
 

Semelhante a Target costing (20)

Cost leader1
Cost leader1Cost leader1
Cost leader1
 
Driving a Culture of Profitability into Your Sales Organization
Driving a Culture of Profitability into Your Sales OrganizationDriving a Culture of Profitability into Your Sales Organization
Driving a Culture of Profitability into Your Sales Organization
 
Performance report sample
Performance report samplePerformance report sample
Performance report sample
 
ROI Demystified WOMMA Summit 2010
ROI Demystified WOMMA Summit 2010ROI Demystified WOMMA Summit 2010
ROI Demystified WOMMA Summit 2010
 
LeanCOST: the smartest costing solution
LeanCOST: the smartest costing solutionLeanCOST: the smartest costing solution
LeanCOST: the smartest costing solution
 
Social Benefit Analysis of Modern Wholesale Markets
Social Benefit Analysis of Modern Wholesale MarketsSocial Benefit Analysis of Modern Wholesale Markets
Social Benefit Analysis of Modern Wholesale Markets
 
Co pa power point
Co pa power pointCo pa power point
Co pa power point
 
Ifs kaizen costing and value analysis
Ifs kaizen costing and value analysisIfs kaizen costing and value analysis
Ifs kaizen costing and value analysis
 
Evaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkotEvaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkot
 
Evaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkotEvaluating channel performance ppt @ bec doms bagalkot
Evaluating channel performance ppt @ bec doms bagalkot
 
Akuntansi keuangan aktiva tetap
Akuntansi keuangan aktiva tetapAkuntansi keuangan aktiva tetap
Akuntansi keuangan aktiva tetap
 
Buying Into The Budget
Buying Into The BudgetBuying Into The Budget
Buying Into The Budget
 
moodle upload
moodle upload moodle upload
moodle upload
 
Operations Strategies of EasyJet vs Virgin Atlantic
Operations Strategies of EasyJet vs Virgin AtlanticOperations Strategies of EasyJet vs Virgin Atlantic
Operations Strategies of EasyJet vs Virgin Atlantic
 
Cost Management Powerpoint Presentation Slides
Cost Management Powerpoint Presentation SlidesCost Management Powerpoint Presentation Slides
Cost Management Powerpoint Presentation Slides
 
Marketing Plan
Marketing PlanMarketing Plan
Marketing Plan
 
Cost Reduction.pdf
Cost Reduction.pdfCost Reduction.pdf
Cost Reduction.pdf
 
Cost Management PowerPoint Presentation Slides
Cost Management PowerPoint Presentation SlidesCost Management PowerPoint Presentation Slides
Cost Management PowerPoint Presentation Slides
 
What Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost ManagementWhat Does It Cost? Activity Based Cost Management
What Does It Cost? Activity Based Cost Management
 
Mc donald english_29th
Mc donald english_29thMc donald english_29th
Mc donald english_29th
 

Mais de saiwagh2001

Corporate treasury
Corporate treasuryCorporate treasury
Corporate treasurysaiwagh2001
 
Study of g sec market
Study of g sec marketStudy of g sec market
Study of g sec marketsaiwagh2001
 
Kingfisher deccan deal
Kingfisher deccan dealKingfisher deccan deal
Kingfisher deccan dealsaiwagh2001
 
Analysis of forex market
Analysis of forex marketAnalysis of forex market
Analysis of forex marketsaiwagh2001
 
Indian paint industry
Indian paint industryIndian paint industry
Indian paint industrysaiwagh2001
 

Mais de saiwagh2001 (8)

Corporate treasury
Corporate treasuryCorporate treasury
Corporate treasury
 
Study of g sec market
Study of g sec marketStudy of g sec market
Study of g sec market
 
Rti act
Rti actRti act
Rti act
 
Kingfisher deccan deal
Kingfisher deccan dealKingfisher deccan deal
Kingfisher deccan deal
 
Analysis of forex market
Analysis of forex marketAnalysis of forex market
Analysis of forex market
 
Indian paint industry
Indian paint industryIndian paint industry
Indian paint industry
 
Treasury
TreasuryTreasury
Treasury
 
Treasury
TreasuryTreasury
Treasury
 

Último

Grateful 7 speech thanking everyone that has helped.pdf
Grateful 7 speech thanking everyone that has helped.pdfGrateful 7 speech thanking everyone that has helped.pdf
Grateful 7 speech thanking everyone that has helped.pdfPaul Menig
 
Call Girls in Gomti Nagar - 7388211116 - With room Service
Call Girls in Gomti Nagar - 7388211116  - With room ServiceCall Girls in Gomti Nagar - 7388211116  - With room Service
Call Girls in Gomti Nagar - 7388211116 - With room Servicediscovermytutordmt
 
VIP Kolkata Call Girl Howrah 👉 8250192130 Available With Room
VIP Kolkata Call Girl Howrah 👉 8250192130  Available With RoomVIP Kolkata Call Girl Howrah 👉 8250192130  Available With Room
VIP Kolkata Call Girl Howrah 👉 8250192130 Available With Roomdivyansh0kumar0
 
The CMO Survey - Highlights and Insights Report - Spring 2024
The CMO Survey - Highlights and Insights Report - Spring 2024The CMO Survey - Highlights and Insights Report - Spring 2024
The CMO Survey - Highlights and Insights Report - Spring 2024christinemoorman
 
Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...
Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...
Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...Dipal Arora
 
VIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service Jamshedpur
VIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service JamshedpurVIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service Jamshedpur
VIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service JamshedpurSuhani Kapoor
 
Ensure the security of your HCL environment by applying the Zero Trust princi...
Ensure the security of your HCL environment by applying the Zero Trust princi...Ensure the security of your HCL environment by applying the Zero Trust princi...
Ensure the security of your HCL environment by applying the Zero Trust princi...Roland Driesen
 
Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999
Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999
Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999Tina Ji
 
Cash Payment 9602870969 Escort Service in Udaipur Call Girls
Cash Payment 9602870969 Escort Service in Udaipur Call GirlsCash Payment 9602870969 Escort Service in Udaipur Call Girls
Cash Payment 9602870969 Escort Service in Udaipur Call GirlsApsara Of India
 
Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...
Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...
Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...lizamodels9
 
Progress Report - Oracle Database Analyst Summit
Progress  Report - Oracle Database Analyst SummitProgress  Report - Oracle Database Analyst Summit
Progress Report - Oracle Database Analyst SummitHolger Mueller
 
BEST ✨ Call Girls In Indirapuram Ghaziabad ✔️ 9871031762 ✔️ Escorts Service...
BEST ✨ Call Girls In  Indirapuram Ghaziabad  ✔️ 9871031762 ✔️ Escorts Service...BEST ✨ Call Girls In  Indirapuram Ghaziabad  ✔️ 9871031762 ✔️ Escorts Service...
BEST ✨ Call Girls In Indirapuram Ghaziabad ✔️ 9871031762 ✔️ Escorts Service...noida100girls
 
Mondelez State of Snacking and Future Trends 2023
Mondelez State of Snacking and Future Trends 2023Mondelez State of Snacking and Future Trends 2023
Mondelez State of Snacking and Future Trends 2023Neil Kimberley
 
Catalogue ONG NUOC PPR DE NHAT .pdf
Catalogue ONG NUOC PPR DE NHAT      .pdfCatalogue ONG NUOC PPR DE NHAT      .pdf
Catalogue ONG NUOC PPR DE NHAT .pdfOrient Homes
 
RE Capital's Visionary Leadership under Newman Leech
RE Capital's Visionary Leadership under Newman LeechRE Capital's Visionary Leadership under Newman Leech
RE Capital's Visionary Leadership under Newman LeechNewman George Leech
 
Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...
Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...
Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...anilsa9823
 
Insurers' journeys to build a mastery in the IoT usage
Insurers' journeys to build a mastery in the IoT usageInsurers' journeys to build a mastery in the IoT usage
Insurers' journeys to build a mastery in the IoT usageMatteo Carbone
 
Monte Carlo simulation : Simulation using MCSM
Monte Carlo simulation : Simulation using MCSMMonte Carlo simulation : Simulation using MCSM
Monte Carlo simulation : Simulation using MCSMRavindra Nath Shukla
 

Último (20)

Grateful 7 speech thanking everyone that has helped.pdf
Grateful 7 speech thanking everyone that has helped.pdfGrateful 7 speech thanking everyone that has helped.pdf
Grateful 7 speech thanking everyone that has helped.pdf
 
Call Girls in Gomti Nagar - 7388211116 - With room Service
Call Girls in Gomti Nagar - 7388211116  - With room ServiceCall Girls in Gomti Nagar - 7388211116  - With room Service
Call Girls in Gomti Nagar - 7388211116 - With room Service
 
VIP Kolkata Call Girl Howrah 👉 8250192130 Available With Room
VIP Kolkata Call Girl Howrah 👉 8250192130  Available With RoomVIP Kolkata Call Girl Howrah 👉 8250192130  Available With Room
VIP Kolkata Call Girl Howrah 👉 8250192130 Available With Room
 
The CMO Survey - Highlights and Insights Report - Spring 2024
The CMO Survey - Highlights and Insights Report - Spring 2024The CMO Survey - Highlights and Insights Report - Spring 2024
The CMO Survey - Highlights and Insights Report - Spring 2024
 
Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...
Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...
Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...
 
Best Practices for Implementing an External Recruiting Partnership
Best Practices for Implementing an External Recruiting PartnershipBest Practices for Implementing an External Recruiting Partnership
Best Practices for Implementing an External Recruiting Partnership
 
VIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service Jamshedpur
VIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service JamshedpurVIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service Jamshedpur
VIP Call Girl Jamshedpur Aashi 8250192130 Independent Escort Service Jamshedpur
 
Ensure the security of your HCL environment by applying the Zero Trust princi...
Ensure the security of your HCL environment by applying the Zero Trust princi...Ensure the security of your HCL environment by applying the Zero Trust princi...
Ensure the security of your HCL environment by applying the Zero Trust princi...
 
Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999
Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999
Russian Faridabad Call Girls(Badarpur) : ☎ 8168257667, @4999
 
Cash Payment 9602870969 Escort Service in Udaipur Call Girls
Cash Payment 9602870969 Escort Service in Udaipur Call GirlsCash Payment 9602870969 Escort Service in Udaipur Call Girls
Cash Payment 9602870969 Escort Service in Udaipur Call Girls
 
Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...
Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...
Call Girls In DLf Gurgaon ➥99902@11544 ( Best price)100% Genuine Escort In 24...
 
Progress Report - Oracle Database Analyst Summit
Progress  Report - Oracle Database Analyst SummitProgress  Report - Oracle Database Analyst Summit
Progress Report - Oracle Database Analyst Summit
 
BEST ✨ Call Girls In Indirapuram Ghaziabad ✔️ 9871031762 ✔️ Escorts Service...
BEST ✨ Call Girls In  Indirapuram Ghaziabad  ✔️ 9871031762 ✔️ Escorts Service...BEST ✨ Call Girls In  Indirapuram Ghaziabad  ✔️ 9871031762 ✔️ Escorts Service...
BEST ✨ Call Girls In Indirapuram Ghaziabad ✔️ 9871031762 ✔️ Escorts Service...
 
Mondelez State of Snacking and Future Trends 2023
Mondelez State of Snacking and Future Trends 2023Mondelez State of Snacking and Future Trends 2023
Mondelez State of Snacking and Future Trends 2023
 
KestrelPro Flyer Japan IT Week 2024 (English)
KestrelPro Flyer Japan IT Week 2024 (English)KestrelPro Flyer Japan IT Week 2024 (English)
KestrelPro Flyer Japan IT Week 2024 (English)
 
Catalogue ONG NUOC PPR DE NHAT .pdf
Catalogue ONG NUOC PPR DE NHAT      .pdfCatalogue ONG NUOC PPR DE NHAT      .pdf
Catalogue ONG NUOC PPR DE NHAT .pdf
 
RE Capital's Visionary Leadership under Newman Leech
RE Capital's Visionary Leadership under Newman LeechRE Capital's Visionary Leadership under Newman Leech
RE Capital's Visionary Leadership under Newman Leech
 
Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...
Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...
Lucknow 💋 Escorts in Lucknow - 450+ Call Girl Cash Payment 8923113531 Neha Th...
 
Insurers' journeys to build a mastery in the IoT usage
Insurers' journeys to build a mastery in the IoT usageInsurers' journeys to build a mastery in the IoT usage
Insurers' journeys to build a mastery in the IoT usage
 
Monte Carlo simulation : Simulation using MCSM
Monte Carlo simulation : Simulation using MCSMMonte Carlo simulation : Simulation using MCSM
Monte Carlo simulation : Simulation using MCSM
 

Target costing

  • 1. Target Costing By: Sainatth Wagh
  • 2. Definition Target Costing (TC) is defined as a cost management tool for reducing the overall cost of product over its entire life cycle with the help of the production, engineering, R&D….. Intent of target costing Reduction in cost Planning & designing high quality products Meeting customers needs Using value engineering to target cost Attain target cost using standard cost TC which can enable attain desirable market share
  • 3. Nature of Target Costing Design Type of Product Cost Technical Specification Technical Requirements Customers Needs Market Resource Consumption (Acq Price) Price
  • 4. Target Costing Price led Cross-functional costing teams Key Life-cycle principles Value-chain costs of target orientation costing Focus on Focus on process product design Focus design on the customer
  • 5. Target costing-Methods 1. Subtraction Method Based on competitors’ price, where the target cost is worked backwards from the market price. The target result may represent a very rigorous target and may be difficult to achieve. 2. Addition Method Based on the existing technology and past cost data of the company. It is achievable but ignores Market Conditions. 3 Integrated Method Integration of Subtraction & Addition Methods
  • 6. Steps in Target Costing-Summary Value added Product By each Customer Performance Feature & Needs Features Component Choose a product Design Choose With assured target profit Choose Cost target for each Manufacturing Suppliers assuring component Design assuring Target cost target costs Monitor Conduct VE to Product performance Cost Review Reduce Target Costs Cost & Profit Target Price
  • 7. Achieving the Target Cost- Ex. Pump EXHIBIT 1 CUSTOMER REQUIREMENT RANKINGS Less Ranking More Raw % of Total Competitive Customer Requirement Important Important Score Raw Score Comparison 1 2 3 4 5 1 2 3 4 5 Multiple speeds 4 4 14.8% Horizontal oscillation 3 3 11.1% Vertical oscillation 1 1 3.7% Light weight 4 4 14.8% Adjustable height 1 1 3.7% Airflow capacity 4 4 14.8% Quietness 5 5 18.5% Compact size 3 3 11.1% Looks nice 2 2 7.4% Total 27 100% Us Competitor Both
  • 8. Achieving the Target Cost- Ex. Pump EXHIBIT 2 COST GAP BREAKDOWN BY LIFE CYCLE AND VALUE CHAIN Value Chain Life Cycle Internal Costs External Costs Total Costs Target Current Gap Target Current Gap Target Current Gap Research and development $ 0.30 $ 0.50 $ 0.20 $ 0.30 $ 0.50 $ 0.20 Manufacturing 4.00 5.00 1.00 $ 13.00 $ 15.00 $ 2.00 17.00 20.00 3.00 Marketing and distribution 1.50 2.00 0.50 4.50 5.00 0.50 6.00 7.00 1.00 Service and support 0.25 0.50 0.25 0.25 0.50 0.25 General administration 0.75 1.00 0.25 0.75 1.00 0.25 Total $ 6.80 $ 9.00 $ 2.20 $ 17.50 $ 20.00 $ 2.50 $ 24.30 $ 29.00 $ 4.70
  • 9. Achieving the Target Cost- Ex. Pump EXHIBIT 3 COMPONENT COST BREAKDOWN Percent of Component Function Cost total cost Motor Turns blade $ 8 40% Transmission Provides oscillation capabilities 4 20% Speed control/switch Controls blade speed 3 15% Body Houses motor, transmission, speed control 2 10% Blade Moves air 1 5% Blade guard Protects blade from contacting objects 2 10% Total $ 20 100%
  • 10. Achieving the Target Cost- Ex. Pump EXHIBIT 4 QUALITY-FUNCTION-DEPLOYMENT (QFD) MATRIX Components Customer Requirements Speed Blade Motor Transmission control Body Blade guard Multiple speeds Horizontal oscillation Vertical oscillation Light weight Adjustable height Airflow capacity Quietness Compact size Looks nice Strong correlation Moderate correlation Weak correlation
  • 11. Achieving the Target Cost- Ex. Pump EXHIBIT 5 COMPONENT CONTRIBUTION TO CUSTOMER REQUIREMENTS Components Customer Requirements Speed Blade Motor Transmission control Body Blade guard Multiple speeds 40 X 14.8 = 5.92 60 X 14.8 = 8.88 Horizontal oscillation 80 X 11.1 = 8.88 20 X 11.1 = 2.22 Vertical oscillation 80 X 3.7 = 2.96 20 X 3.7 = 0.74 Light weight 70 X 14.8 = 10.36 10 X 14.8 = 1.48 20 X 14.8 = 2.96 Adjustable height 100 X 3.7 = 3.70 Airflow capacity 50 X 14.8 = 7.40 50 X 14.8 = 7.40 Quietness 40 X 18.5 = 7.40 60 X 18.5 = 11.10 Compact size 5 X 11.1 =0.56 5 X 11.1 =0.56 30 X 11.1 =3.33 30 X 11.1 =3.33 30 X 11.1 =3.33 Looks nice 50 X 7.4 = 3.70 50 X 7.4 = 3.70 Total contribution percentage 31.64% 13.88% 8.88% 16.65% 21.83% 7.03% Contribution weight assigned to the component (Correlation) X Importance to the customer (Raw Score from Exhibit 1)
  • 12. Achieving the Target Cost- Ex. Pump EXHIBIT 6 CALCULATION OF VALUE INDICES FOR COMPONENTS Percent of Contribution Component Total Cost Percentage Value Action (Exhibit 3) (Exhibit 5) Index Implied Motor 40% 31.64% 1.26 Reduce cost Transmission 20% 13.88% 1.44 Reduce cost Speed control 15% 8.88% 1.69 Reduce cost Body 10% 16.65% 0.60 Improve Blade 5% 21.83% 0.23 Improve blade guard 10% 7.03% 1.42 Reduce cost
  • 13. Make the Decision Begin Value engineering Repeat Achieve Yes No Close No value target enough? engr.? cost? Yes Yes No Abort project Release design for production