Chapter 3 - Costing techniques

Question 1

What is target costing?

Answer 1

A proactive cost control system

Question 2

How is target costing calculated?

Answer 2

By deducting the target profits from a pre-determined selling price based on customer views

Question 3

What is value analysis?

Answer 3

Systematic interdisciplinary examination factors affecting the cost of product or service, in order to devise means of achieving the specified purpose most economically at the required standard of quality and reliability.

Question 4

What is value engineering?

Answer 4

Redesign of an activity, product or service so that value to the customer is enhanced, while costs are reduced or at least increased by less than the resulting price increase

Question 5

What is functional analysis?

Answer 5

Analysis of the relationships between product functions, their perceived value to the customer and their cost of provision

Question 6

When is value analysis used and what does it focus on?

Answer 6

Used: During production
Focus on: Process to reduce costsW

Question 7

When is value engineering used and what does it focus on?

Answer 7

Used: Prior to production
Focus: Process to avoid costs

Question 8

When is functional analysis used and what does it focus on?

Answer 8

Used: Prior to production
Focus on: Customer value

Question 9

What is life cycle costing?

Answer 9

accumulation of costs for activities that occur over the entire life of a product, from inception to abandonment