Target Costing (2) Flashcards
What will increasing the selling price not do?
Close the cost gap (as increasing selling price will negatively affect sales volume)
What is value analysis?
Examining the factors which affect cost of a product or service, so to devise ways of achieving intended purpose most economically
What is meant by cost value?
The cost of producing and selling an item
What is meant by exchange value?
Market value of the product or service
What is meant by use value?
What the article does, the purpose it fulfils
What is meant by esteem value?
Prestige the customer attaches to the product
What does value analysis seek to refine?
The design of the product to reduce unit cost and to provide the same use value at lowest cost
What does value analysis attempt to maintain or enhance?
The esteem value of a product at the lowest cost. Aim to reduce cost without compromising other aspects of value
When is the most effective time to eliminate unnecesssary cost and reduce expected cost of the target cost level?
During the product design and development phase, not after live production has begun
Technique for improving production technologies and processes (reduce number)
Reduce number of components
Technique for improving production technologies and processes (staff)
Use cheaper staff if there’s no quality affect
Technique for improving production technologies and processes (standard)
Using standard components wherever possible
Technique for improving production technologies and processes (technology)
Acquiring new, more efficient technology
Technique for improving production technologies and processes (training staff)
Training staff in more efficient techniques
Technique for improving production technologies and processes (non-value activities)
Cutting out non-value added activities
