Target costing - Contemporary Concepts, Cost Management Video Lecture | Cost Management - B Com

first thing first what is target costing
it is a system of profit pleading and
cosmides men that determine the
lifecycle cost at each products that
must be produced to enhance the
organization's desired level profit
together with product anticipated
selling price it is also a technique for
establishing the maximum cost we could
make a product yet still make a required
profit margin it is an increasingly
common technique in manufacturing and
auto Mobile's industry
now we're moving on to the advantages of
target costing
first advantages is cost optimization
target costing permit us to give the
suitable way to produce or acquire
products at the lowest cost every single
of organization common goal is to
minimize cost as it give a financial
flexibility to focus on achieving large
profit margins or to enter the market at
low price to grab a large customer base
the organization can minimize the cost
by removing unnecessary items and reduce
our expenses for example by choosing a
supplier which give us a low price but
high quality materials
another advantages of target costing is
to improve processes
it is by the result from the team's
effort target costing teams have to deal
with material costs labor requirements
and processes teams will discover in
efficiency in current processes and
advice any improvement that can increase
efficiency and reduce costs this
improvement do apply to the product that
being targeted as well as other products
using the same process by improving
processes the company can decrease the
cost in other product lines as well
import relationship among team
management also one of the advantages of
target costing
target costing teams will need a staff
from different section of organization
to cooperate on solutions to reduce the
cost of the products this stuff will
learn about the activities that occur in
other division of organization and how
their own actions affect others
this stuff can obtain an appreciation
for the image of the business and build
relationships that are transfer to the
future projects
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