...Strengths: Target cost system is ideal for assembly-oriented industries with great involvement in the diversification of product lines, usage of technologies of factory automation, development of systems for reducing cost during all the stages of product’s life cycle such as is the case of Nissan Motor# Since Nissan cost system is continuously undergoing modification, in the case the target cost cannot be achieved, the products may still be launched if management are still confident that the process of continuous improvement will enable the target cost to be achieved early in the product’s life# so the actual cost can be driven down to the target cost with the help of a multi-disciplinary team. This cost system is oriented toward the customer which is the most important shareholder in any organization, here the customer requirements together with the target profitability of Nissan, are the primary cost drivers. The very first stage requires market research to determine the customer’ perceived value of the product based in its functions and its attributes (mind-sets to identify design attributes), its differentiation value relative to competing products and the price of competing products. This cost system seems aligned with the plan to obtain the number-one rating in terms of customer satisfaction in the case of Nissan. The implementation of this system contributes to the awareness and empowerment of all employees involved in all stages of the product and incentives partnerships...
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...INTRODUCTION OF TARGET COSTING Target costing is a system of profit planning and cost management. The required features and performance of the proposed product are established. Then target costing determines the life cycle cost at which the product must be produced, to generate the firm’s desired level of profit. Given the product’s anticipated selling price (Cooper and Slagmulder,1999, p.166). Note that target costing is not a method for product costing , it is a technique for cost management. It was devised in Japan, where it is used widely, particularly in automobile, electrical and equipment-manufacturing industries (Lorino, 1995). With the effect of globalization, it is gradually gaining acceptance in the Western world. EXAMPLE OF TARGET COSTING Let’s assume that the planned selling price of $250 and a planned cost, including upstream and downstream costs, of $200 per unit. The selling price was based on the plan cost per unit plus a planned profit markup of 25% of selling price. If the company had used target costing, the preparation of the life cycle budget and the planned level of profit might have been very different. Let’s say the market research indicated to ACDP that to sell 50 000 units the CD Super would have to be priced at $190. Given this information we can estimate the target cost for CD Super as: Target cost = target selling price – (target profit margin) = $190 – (0.25 X $190) = $142.5 THE TARGET COSTING PROCESS Early in the product planning stage...
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... thus proving their flexibility in any business environment, whether turbulent or uncertain. Ensuring financial stability also requires adoption and use of an efficient management system. 1. What is Target Costing? Target costing of a product or job is sum total of the variable cost targets fixed for each element of cost (material, labor, power, consumables etc.) required to be incurred for producing that product or job estimated on zero-base principles, plus the fixed cost targeted on the same principles, so that the total cost plus the estimated margin of profit is not more than the price the product is capable of fetching in the market. Zero base principle is the variable cost incurred for producing zero units of the product and from that position what is the incremental variable cost for each unit plus the fixed targeted cost (Rent, Rates and taxes, advertisement, communication etc.) required to set up the facility to produce an estimated number of units. 2.Why is Target Costing important for corporations yearning to have market share and profitable future? The Advantage of Target Costings: 1. We have a cost goal to achieve within the selling price, on realization of which there can be no loss. Cost Optimization: A primary advantage of target costing is that it allows you to analyze the best way to make or acquire products at the lowest costs. Minimizing costs is a common financial goal of any small business, regardless of whether they offer high, medium...
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...four products introduced over the last three years, the company found that prices were usually above what they projected by 13%, while costs were up by 65%. Senior Moonglow financial management, with the full support of the CEO, has concluded that a target costing initiative focused on both new and existing products should be introduced throughout the company. It was agreed by Moonglow management that cost management would have to receive much greater attention “every step of the way” in the development process. During product planning (marketing), as a part of product definition, the product’s selling price, projected volume, and initial “target” cost would be determined. In concept design, rough cost estimates would be assessed and assigned to component or functional blocks. By general design and prototype development, more rough cost estimates would be made to assess whether the target cost could still be achieved. Similarly, in detail design (drawings and specifications) and manufacturing system design (processes, tooling, etc.) detailed cost estimates would continue to be made to assure that the target cost could be met. During each and every step of the development cycle, cost estimates would be made to assure that the target cost was attainable. ● Plan price and cost reductions; ● Develop a formal “estimated cost system”; ● Demand “estimated cost reviews” at each step; ● Continue to develop “team” approach to new product development; ● Measure and learn from...
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...MidSouth Microbrewery* In 2002, two former Anheuser-Busch employees started their own brewery, MidSouth Microbrewery (MSM). Alexandra (Alex) Bennett and Pete Landgren developed a business plan and obtained a business start-up loan from a local commercial bank. The loan proceeds, combined with their own savings, were sufficient to purchase a small manufacturing facility and equipment. To save money, they purchased most of the stainless steel equipment at a dairy farm auction and then converted the equipment to suit their brewing needs. Other supplies and equipment were purchased from a brewers supply house in Tennessee. Through December 2007, MidSouth Microbrewery had grown steadily, and produced three labels of specialty beers. The company’s first profits were posted in 2005. The Brewing Process Brewing is essentially a four-stage process. Direct labor is incurred primarily in stages one, two, and four. To begin brewing a batch, malt, sugar, hops, and water are mixed and “cooked”. MSM uses a 350-liter copper kettle with a natural gas burner for this stage, which takes 4 to 7 hours, depending on the particular brew produced. This produces a mixture referred to as wort. In stage 2, the wort is siphoned through a wort chiller into one of eight fermentation tanks owned by MSM. The wort chiller is a double copper tube in which cold water is forced in one direction in the outer tube and the wort is pumped the other direction into a fermentation tank through the inner...
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...Accountant 12 March 2002 Implementation of Target Costing and the concerns Target costing is an approach developed by the Japanese companies. It is: “Target costing is the process to determine the maximum allowable cost for a particular new product and then developing the prototype that can be profitably manufactured and distributed for that maximum target cost figure.” Target cost for a particular product can be calculated by starting with the anticipated selling price/target price of the product and less the profit margin required or desired profit as follows: Anticipated selling price – desired profit = Target cost Target costing in fact, is a tool that can be used for managing the costs. Normally, the planners will make use of target costing during product and process design in order to reduce the future manufacturing costs of the product. Concerns about Target Costing: Studies on target costing carried out in Japan have shown that there are several problems that occur in the process of implementing the target costing system. This is true especially in the situation where the company only focuses on the issue of meeting the target cost and ignores the other elements of overall company goals. The problems are: In general, there will be a lot of parties involved in the process of target costing. Due to the reason that everyone is having their own ideas, therefore, conflicts will occur between those who are took part in target costing process. Sometimes the subcontractors/suppliers...
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...price is established. The desired profit margin is subtracted from the target selling price to determine the target cost. If the target cost is below the company’s current cost, the company may decide to introduce the product and functional cost analysis may attempt to reduce cost to an acceptable level. If the target cost is above the current cost, functional cost analysis will make changes and prepare another cost estimates. If the target cost is equal to current cost, company may decide whether or not to introduce the new product. As an example, based on the market condition, TMCA want to produce new model of car named Corolla Ascent 4D Sedan at a selling price of $20,740. 3. Establishing a Target Profit for the product Marketing department plays an important role in determining the target cost of the new product. After estimating the target selling price, the company has to estimate the sales volume in order to calculate the total sales revenue. From the total sales revenue, the desired profit, normally determine by using return on sales, is subtracted. After that the desired profit margin is determined with reference to the company’s long-term strategy. As an example, TMCA estimates its sales volume of 200 units. So, its total sales will be $4,148,000. Based on the long-term company’s strategy, assume that the target profit margin is 32.26%. 4. Determine the target cost The target cost is arriving from subtracting the desired profit from the selling...
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...TARGET COSTING FOR SUPPLY CHAIN MANAGEMENT Target Costing is a process to make sure that a product launched with particular functions, quality and price can be made at a cost that would generate a reasonable amount of profit. It is different from the other costing approaches as it is a part of the company’s product development and introduction process. Therefore target costing requires all the information regarding the company’s competitive, product and supply chain strategies. After getting this information, as the company shifts from product strategy phase and introduction process through product concept, all the target costing activities are performed. During the early stages of target costing, the company through the market research statistics, anticipates the price that the consumers are going to pay for their product, by taking its various functions, quality and the substitutes offered by the remaining firms. Depending on this price, the company deducts the profit margin in order to meet the demands of the stakeholders and also to invest for the research and development of new products. The target cost is the maximum allowable cost that the company should incur manufacturing, distributing, servicing and disposing the product. Target costing enables the company to put efforts in order to reach the requirements of the customers. It enables to meet or even to exceed the quality and functionality so that product competitiveness can be attained. Target costing cannot be used...
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...1. What are the strengths and weaknesses of the target costing system? First, target costing originally starts with mangers estimate the cost that customers are willing to pay and how competitor will price the same products or services. (Cost Accounting. Page 545). In the Nissan case, customers are very knowledgeable because the customer demand requires more variations and model types of automobiles. This is a favorable market for Nissan. Nissan managers can set an expected profit margin because the customers has a very high demand of automobiles and they know the automobiles market very well. Second, target costing for a product includes direct manufacturing costs direct materials, direct manufacturing labor, and direct machining costs. (Cost Accounting. Page 519). Analyzing each cost element and eliminate the unnecessary value-added is one of the cost management goals in the target costing system. In order to have a competitive price, Nissan managers have to eliminate some value-added costs which are unnecessary and not so helpful for the automobile manufacturing and selling process. Target costing can shorten the product lives and save Nissan company time to do marketing and financial management. A good example in the Nissan case it that they eliminated the "five-door variant" because it is unnecessary. Last, target costing system helps Nissan build a cross-functional team. The design department, manufacturing department, sales department and management department work...
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...ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-8-checkpoint-1-target-costing/ Contact us at: nerdypupil@gmail.com ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING ACC 227 Week 8 Checkpoint 1 Target Costing Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 8 Checkpoint 1 Target Costing in order to ace their studies. ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-8-checkpoint-1-target-costing/ Contact us at: nerdypupil@gmail.com ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING ACC 227 Week 8 Checkpoint 1 Target Costing Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 8 Checkpoint 1 Target Costing in order to ace their studies. ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-8-checkpoint-1-target-costing/ Contact us at: nerdypupil@gmail.com ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING ACC 227 Week 8 Checkpoint 1 Target Costing Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 8 Checkpoint 1 Target Costing in order to ace their studies. ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: http://www.nerdypupil.com/product/acc-227-week-8-checkpoint-1-target-costing/ Contact us at: nerdypupil@gmail...
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...Kevin Dunn MGT 364- Section 01 Research Paper: Product Development Dr. Denton November 21, 2013 Table of Contents: I. Introduction……………………………………………………………………3 II. Developing Products………………………………………………………….4 III. Product Differentiation……………………………………………………..10 IV. Conclusion and Recommendations ………………………………………..13 V. Works Cited…………………………………………………………………..15 Introduction Product development is one of the most important aspects to any business. New and innovative products have placed companies like Apple, Google and Samsung on the map. Companies like General Motors have been able to rebound from bankruptcy thanks to product development. On the other hand, companies like Eastman Kodak have fallen by the wayside due to their inability to keep up with new products. According to an article in the European Journal of Engineering Education, “Product development is the set of activities starting with the perception of a market need and ending in the production and sale of a new product satisfying that need” (Silva, Arlindo, Elsa Henriques, Aldina Carvalho). By successfully developing a product firms can see increased profits as well as an increased market share. To the helicopter game players, proper product development can set one team apart and earn them more profits. The purpose of this research paper is to explain how to successfully build a product through the phases of product development and product differentiation. As well as to give recommendations...
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...in the numerous activities and the services provided by the club. Fitness first center will provide fitness and health services which are high in quality and pocket friendly in cost. SERVICES- The Fitness first Center has the following activities and services: * volleyball * Table Tennis * Fitness center with protein supplement * badminton * Massage * cafe * spa Market Analysis Summary Dublin is the capital and most famous city. The population of Dublin is grown by 1.6% each year for the past five years. The actual population of Dublin is approximately 5,456,123.In general, the city population is increasing employment in the city's high-tech companies. This has attracted a type of professional that is the target customer for the Mountain Brook Fitness Center. 4.1 Market Segmentation The Mountain Brook Fitness Center will focus on the young urban professionals as its primary customer base. Market Analysis | | | 2002 | 2003 | 2004 | 2005 | 2006 | | Potential Customers | Growth | | | | | | CAGR | Young Professionals | 10% | 100,000 | 110,000 | 121,000 | 133,100 | 146,410 | 10.00% | Other | 0% | 0 | 0 | 0 | 0 | 0 | 0.00% | Total | 10.00% | 100,000 | 110,000 | 121,000 | 133,100 | 146,410 | 10.00% |...
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...know, Top of the Rock Toys want the children of our world to enjoy playing, yet at the same time continue to learn and develop the fundamentals needed to become the top minds in our country. The reason for this memo is to inform you that I will be leading the team that will develop this new product line, since this will be a joint effort from all the management team I am cordially asking that all teams that have data that pertains to demographics of our markets as well as psychographics please contact me as soon as possible so that I may begin to understand our target market, thus building our toy company into the leader of educational toys. The following will be a list of what I may or hope to obtain from the management team. The data that is provided will negate our goals so it is vital that you only pass along key information to the specific age group of 7-10 years of age. Our newest products have aimed their targets at younger children then normal, with this said we will want to understand the psychographics of these children’s behaviors. What we as a team must look at in particular is how the children in this age group make the decision to want to play with our toys. The main areas I would like to cover will be the personality of the children. It is not as simple as the personality of these children makes them...
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...to be taken. The concept of the study is to prepare a small business in Potrero Malabon City. INPUT PROCESS OUTPUT Figure 1. Conceptual Diagram of Proposed System Statement of the Problem This research entitled “Place Marketing Mix Strategies for Selected Local Brand Cupcake Product: Effectiveness Barangay Potrero Malabon City” aims to build a business which determines to know where in Barangay Potrero Malabon City. Furthermore this business take attract residence to buy a cupcake. Specifically, this study wants to answer the following question: 1. From which place in Potrero Malabon city would you choose to sell this product? a. Near school b. Near church c. At the market 2. Who will be your target costumer? a. Students/Children b....
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...Danny McInnis Meredith Murphy Melanie McKoin Calder Miller Elliot Beatty Red Stick Music Venue 11/15/13 FEASIBILITY STUDY WORKSHEET QUESTIONS 1. Cover Page This may seem obvious, but entrepreneurs sometimes forget this. 1.a. What is the venture name? 1.b What is (are) your name(s) and how can you be contacted? Address, phone, fax, e-mail. 2. Table of Contents This helps the reader find information quickly and easily. Include page numbers. (Again, it may seem obvious, but be sure that the page numbers on the table of contents actually match the page numbers in the text!). 3. Executive Summary This section is always the first to be read. In less than two pages, you must get the reader excited about your business concept. If you fail to interest your reader, this may be all that is read. In two pages or less, describe your organization, demonstrate that customers want your product or service, and describe your founding team. (The Executive Summary should be completed last. It should stand on its own.) 3.a. What problem do you address? 3.b. What is your proposed solution and organization? What business is it, or will it be, in? 3.c. What makes your product/service unique? What is your competitive advantage? 3.d. Who are your customers? How do you know that customers want your product or service? 3.e. What are the projected financials for the project? How much money is needed to start the venture? Where will you obtain funding? 3.f. Who is on the...
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