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.
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planning for 1994, Marlene Baer, Controller, began developing a financial plan to analyze costs and create more accurate projections. Much of the initial projections were based on assumptions that need further evaluation. Direct labor verses activity-based costing is a main consideration in increasing the accuracy of costing and projections. Meeting profit goals is important to the company’s success and necessitates careful consideration of many points. More specifically, the company must be
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1. (TCO 1) Performance reports often compare current period performance with (Points: 4) Performance in a prior period. Planned (budgeted) performance. Both A and B are correct. Neither A nor B is correct. 2. (TCO 1) Marco Diner produced and sold 2,000 bagels last month and had fixed costs of $6,000. If production and sales are expected to increase by 10% next month, which of the following statements is true? (Points: 4) Total fixed costs will increase. Total fixed costs will decrease
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cost accounting, which are; I. Ascertain of cost They are two main methods of ascertaining cost, which are post costing and continuous costing. Post costing; this means an analysis of actual information as they are recorded in the financial book. Its accurate and mainly used in cost plus pricing. Continuous costing; aims at collecting information about cost as and when the activity takes place so that as soon as a job is completed the cost of completion would be known. This involve careful estimations
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Research and Development for other enterprises to help offset the cost or find other avenues to pursue. Activity-Based Overhead Costs and Drivers Ideal Manufacturing activity-based uses in each activity cost item some amount of overhead. The four activity items exist which are revealed by the company. Prototype testing, product design, product development and market analysis are each of the activities which the company engaged. The annual cost of each are; $1,400,000 used in prototype testing, product
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(cost-residual value)/useful life depreciation method in which the depreciation expense is the same each period 8. Know how to calculate accumulated depreciation a. Cost principle: i. Reported on income statement, asset amount is reported on balance sheet, based on original cost b. Matching principle i. Asset's cost allocated to depreciation expense over the life of the asset Long Term Liabilities – Chapter 14 1. Starting on Page 845 make sure you know the 4 types of Bonds and their characteristics.
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Differential cost and revenue, Opportunity and Sunk cost, fixed and variable cost, mixed cost, statement of cost of goods manufactured and sold statement. Ch 1, Book 2 Ch 2, Book 1 A Material Planning, Controlling and Costing: • Procedure for material procurement and use • Material costing methods • Inventory valuation at cost or market whichever is lower • Procedure for spoiled, scrap and defective work • EOQ , Inventory level and reserve stocks • Valuation of inventory • Planning materials requirement
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For any operating business, the primary goal is not just to earn profit but also to maximize their profit margins. As normal convention dictates profit as the difference between revenue and cost, how much profit an entity makes depends largely on how much revenue it earns. Therefore, price and quantity of goods sold are the two most direct influence on the profit of every entity and this makes a not only accurate but also strategic pricing decision a necessity for any business that wants to thrive
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CASE #4: G.G. Toys 1. Do you recommend that G.G. Toys change its existing cost system in the Chicago plant? In the Springfield plant? Why or why not? G.G. Toys should change its existing cost accounting system from traditional costing to activity-based costing (ABC) in the Chicago plant as it is allocating its entire manufacturing overhead on the basis of just one cost driver: production run direct labor cost. Since overhead at the Chicago plant is high, accurate cost accounting system is required
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Activity Based Costing Analysis Critically discuss: a) Why Cambridge Hospital Community Health Network embarked on the ABC study? There are two main reasons why the Cambridge Hospital Community Health Network (the Network) embarked on the Activity Based Costing (ABC) study. Firstly, the Network needed to gain a better understanding of its unit-of-service costs, which had been rising at a rate of 10% per year. In fact it had recently been rated the third-highest cost hospital in the
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