146717
Description
Mind Map by Shahid Musthafa, updated more than 1 year ago
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Created by Shahid Musthafa
over 11 years ago
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Steps In
Target Costing
- Step 1 - Determine a product
specification of which an
adequate sales volume is
estimated.
- A product is developed
that is need and demanded
by the customers in the
market and therefore which
should attarct more sales
volumes
- A product is developed
that is need and demanded
by the customers in the
market and therefore which
should attarct more sales
volumes
- Step 2 - Set a selling price
at which the organization
will be able to achieve a
desired market share.The
price is fixed looking into
the perceptions of the
customers and Competitor
Price
- Step 3 - Estimate the
required profit based on
return on sales or return on
investment.
- Step 4 - Calculate the target
cost = target selling price –
target profit.
- Step 5 - Compile an
estimated cost for the
product based on the
anticipated design
specification and current cost
levels.
- Step 6 - Calculate target cost
gap = estimated cost – target
cost.
- Step 7 - Make efforts to
close the gap.
- "A ANALYSIS HAVE TO BE MADE PRIOR TO THE PRODUCTION PROCESS TO
DESIGN OUT COSTS RATHER THAN CONTROL OUT COST DURING THE ACTUAL
PRODUCTION"
- TECHNIQUES SUCH AS VALUE ENGINEERING MAY BE PERFORMED
,WHICH LOOKS AT EVERY ASPECT OF THE VALUE CHAIN BUSINESS
FUNCTIONS ,WITH AN OBJECTIVE OF COST CONTROL COUPLED
WITH CUSTOMER SATISFACTION.
- Value
Engineering
- A systematic and organized approach to
provide the necessary functions in a project
at the lowest cost. Value engineering
promotes the substitution of materials and
methods with less expensive alternatives,
without sacrificing functionality or quality of
the product. It is focused solely on the
functions of various components and
materials, rather than their physical
attributes. Also called value analysis.
- The concept of value engineering
evolved in the 1940's at General
Electric, in the midst of World War II.
Due to the war, purchase engineer
Lawrence Miles and others sought
substitutes for materials and
components, since there was a chronic
shortage of them. These substitutes
were often found to reduce costs and
provided equal or better performance.
- The concept of value engineering
evolved in the 1940's at General
Electric, in the midst of World War II.
Due to the war, purchase engineer
Lawrence Miles and others sought
substitutes for materials and
components, since there was a chronic
shortage of them. These substitutes
were often found to reduce costs and
provided equal or better performance.
- A systematic and organized approach to
provide the necessary functions in a project
at the lowest cost. Value engineering
promotes the substitution of materials and
methods with less expensive alternatives,
without sacrificing functionality or quality of
the product. It is focused solely on the
functions of various components and
materials, rather than their physical
attributes. Also called value analysis.
- Value
Engineering
- "A ANALYSIS HAVE TO BE MADE PRIOR TO THE PRODUCTION PROCESS TO
DESIGN OUT COSTS RATHER THAN CONTROL OUT COST DURING THE ACTUAL
PRODUCTION"
- Step 8 - Negotiate with the
customer before making the
decision about whether to
go ahead with the project.
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