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Target costing is a management technique that determines the cost at which a specific product must be produced so as to gain maximum profitability at its expected selling price. Target costs are determined by deducting the target profit from the target sales price. Target Costing Assignment Help tells us that target costing technique made Japanese companies more effective in the area of product development. This technique is used in the product designing stage.It helps the management to use cost reduction, cost management and cost planning practices. Its main objective is to reduce costs at the early stages of planning, designing and development of product. Target Costing Assignment Help provides various notes and assignments on target costing and its main principles.
Main Principles of Target Costing
Some key principles of target costing technique explained in Target Costing Assignment Help are given below
• Focus on the Customer- The management must consider the customers’ opinion in order to be successful at target costing. It is a fact that the target costing approach is market driven and the management needs to seek customer feedback. The customers should be asked questions like “what important features do they want? What amount of pay is satisfactory for certain quality of product?” etc. This
• Life-Cycle Costs-The life-cycle costs include the costs of production, customer service, detailed design and testing, concept design product planning, preliminary design and distribution. While determining a product’s target cost, the analysts must include total life-cycle costs of that product. In order to maximize the profitability, the management should focus on the life-cycle costs as well. More information on life-cycle costs can be followed up under Target Costing Assignment Help.
• Cross-Functional Teams- The target costing process requires the involvement of people from many different functions. Individuals from diverse areas of expertise like production scheduling, design engineering, market research, cost management, production engineering, procurement, sales, etc. should contribute in the target costing process. The cross-functional teams contribute in the process of target costing and are also responsible for the entire product.
• Focus on Product Design- One of the key elements in target costing is design engineering. It plays a crucial role in target costing as it determines the target cost of the product. Designing includes activities like specifying the machinery, labour, raw materials and other elements of the production process. In a nutshell, a product should be designed in a way that it can be manufactured in future. Students can learn more about principles of target costing by referring Target Costing Assignment Help.
• Price-Led Costing- The first step in the target costing process is to determine the cost at which the product is to be sold in the market. Target cost is the cost at which the product is manufactured. Then, target cost is determined by subtracting the target profit margin from the target price. To know more about target costing, please refer Target Costing Assignment Help.
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