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    TargetCosting Nissan

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    BHAVYA MERANI 1723107
    Target costing is a management tool that: 1) Determines product costs based on the desired selling price rather than historical costs. 2) Aims to reduce product costs over the lifetime of the product through collaboration between divisions and suppliers. 3) Supports long-term profit planning by encouraging innovation to meet target costs.

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    TargetCosting Nissan

    Uploaded by

    BHAVYA MERANI 1723107
    60 views10 pages
    Target costing is a management tool that: 1) Determines product costs based on the desired selling price rather than historical costs. 2) Aims to reduce product costs over the lifetime of the product through collaboration between divisions and suppliers. 3) Supports long-term profit planning by encouraging innovation to meet target costs.

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    TargetCosting_Nissan

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    Target costing is a management tool that: 1) Determines product costs based on the desired selling price rather than historical costs. 2) Aims to reduce product costs over the lifetime of the product through collaboration between divisions and suppliers. 3) Supports long-term profit planning by encouraging innovation to meet target costs.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    60 views10 pages

    TargetCosting Nissan

    Uploaded by

    BHAVYA MERANI 1723107
    Target costing is a management tool that: 1) Determines product costs based on the desired selling price rather than historical costs. 2) Aims to reduce product costs over the lifetime of the product through collaboration between divisions and suppliers. 3) Supports long-term profit planning by encouraging innovation to meet target costs.

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    © All Rights Reserved
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    You are on page 1of 10

    TARGET COSTING

    TARGET COSTING
    • Product cost is determined from the price
    • A management tool to reduce products cost over its
    lifetime
    • Long term profit planning
    • Necessity of supplementary costing techniques to lower
    product costs
    • Encourages company division and supplier interaction
    • Encourages innovation

    Strengths • Enhances costing control at each step of the products life


    cycle
    • Improves probability of meeting the product life-time
    profitability

    • Increases product development cost


    • Encourages short-cuts in engineering processes

    Weaknesses •
    •
    Increases time to market
    Product costing prediction efficiency lessens over time
    Nissans Costing System
    • Full costing system
    • Direct costs are traced
    directly to the products
    • Direct manufacturing costs
    • Manufacturing supplies
    • Research & Development
    • Machine depreciation
    • Indirect Manufacturing costs
    • Transportation
    • Maintenance
    • Depreciation
    • Corporate expenses
    Primary Uses

    Basis for estimating future profitability in long range strategic plan

    Cost control purposes, ensuring that across the production life of the
    product its target cost is maintained

    Help select product mix

    Identify unprofitable variants that are candidates for discontinuance


    Embedded in a team environment, cross-functional process (concurrent design).

    Assigning individual responsibility

    Reduces product development time and cost by reducing required design changes

    ADVANTAGES
    Flexible way of determining profits

    The target costing system is deployed at a time, the product and process design
    phase, when design choices can have a maximum impact on a product’s cost.

    Includes representatives from their suppliers on the design team of components


    Huge pressures on design team

    Organization conflicts

    DISADVANTAGES Shifting the company’s motivation from products performance to products cost

    Target cost depend upon market research and historical data. Inventing an
    innovative product for the first time, no benchmarking/comparison available.

    Confusion on the market


    Do you think Nissan will be able to support
    the system?
    • Yes, because most of the costs are traceable
    • Of total manufacturing costs
    • 85% are directly traced to products
    • 10% charged to production departments then to products
    • 5% service and administrative costs

    • Nissans costing system is continuously undergoing modification by


    focussing on
    • Tracing costs directly to the product
    • Use appropriate allocation basis
    • Increase visibility and collaboration with parts and service suppliers to reduce costs

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