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    Market Analysis Product Development Using Value Engineering

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    abhishel
    Target costing is a process used early in product development that begins with market analysis to determine a target selling price, then deducts a target profit margin to establish a target cost, and engages cross-functional teams to implement strategies to reduce actual costs to meet the target through design, engineering, sourcing and production. The key features include establishing a target price based on customer research before costs are considered, taking a team-based approach, and being best suited for high-volume manufactured products with shorter life cycles.

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    Market Analysis Product Development Using Value Engineering

    Uploaded by

    abhishel
    30 views7 pages
    Target costing is a process used early in product development that begins with market analysis to determine a target selling price, then deducts a target profit margin to establish a target cost, and engages cross-functional teams to implement strategies to reduce actual costs to meet the target through design, engineering, sourcing and production. The key features include establishing a target price based on customer research before costs are considered, taking a team-based approach, and being best suited for high-volume manufactured products with shorter life cycles.

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    TC Final

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    Target costing is a process used early in product development that begins with market analysis to determine a target selling price, then deducts a target profit margin to establish a target cost, and engages cross-functional teams to implement strategies to reduce actual costs to meet the target through design, engineering, sourcing and production. The key features include establishing a target price based on customer research before costs are considered, taking a team-based approach, and being best suited for high-volume manufactured products with shorter life cycles.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    30 views7 pages

    Market Analysis Product Development Using Value Engineering

    Uploaded by

    abhishel
    Target costing is a process used early in product development that begins with market analysis to determine a target selling price, then deducts a target profit margin to establish a target cost, and engages cross-functional teams to implement strategies to reduce actual costs to meet the target through design, engineering, sourcing and production. The key features include establishing a target price based on customer research before costs are considered, taking a team-based approach, and being best suited for high-volume manufactured products with shorter life cycles.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 7

    TARGET COSTING

    Target costing is a business process aimed at the earliest stages of


    new product and service development. The components of target
    costing consist of concept development through planning and
    market analysis; product development using value engineering;
    and production with continuous improvement goals.
    Target Costing can be best understood by considering its four
    components:
    •Planning and market analysis
    •Concept Development
    •Production Design and Value Engineering
    •Production and continuous improvement
    TARGET COSTING
    It is a cost planning method used during the RD&E cycle that
    focuses on reducing costs for products that require discrete
    manufacturing processes and reasonably short product life cycle.
    Features:
    1.The target selling price is the starting point.

    2.Marketing factors and customer research provide the basis for

    determining selling price (Not cost).

    3.Emphasizes a team approach to achieving the target cost.

    4.Most suited to high sales volume products


    TARGET COSTING PROCESS
    Stage 1: Determine the target price which customers
    will be prepared to pay for the product through Market
    Analysis.

    Stage 2: Deduct a target profit margin from the target


    price to determine the target cost.
    Target Cost = Target Price – Profit Margin

    Stage 3: Estimate the actual cost of the product.

    Stage 4: If estimated actual cost > target cost


    investigate ways of driving down actual cost to the
    target cost.
    .
    COMPARING TRADITIONAL COST REDUCTION
    TO TARGET COSTING
    • Under traditional costing, the profit margin is
    the result of the difference between the expected
    selling price and the estimated production cost.
    Pt = St – C t

    • The target cost is the difference between the


    target selling price and the target profit margin.
    Ctc = Stc – Ptc
    COMPARING TRADITIONAL COST REDUCTION
    TO TARGET COSTING

    Traditional Target
    Costing Costing
    Market Research to Determine

    Customer Customer
    Needs and
    Requirements Price Points

    Product Specifications
    COMPARING TRADITIONAL COST REDUCTION
    TO TARGET COSTING

    Traditional Target
    Costing Costing
    Target Selling Price
    Design Target Product
    Volume

    Engineering Target Profit

    Supplier Pricing
    CONCERNS ABOUT TARGET COSTING

    What are some potential problems in


    implementing target costing?

    1 Conflict can arise between parties involved in the


    process.
    2 Employees may experience burnout due to pressure.
    3 Development time may increase.

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