Chapter 22 - Strategic Cost Management Flashcards
What is target pricing a form of?
Market-based pricing
What is the objective of value engineering?
Reducing costs and satisfying customer needs
Is it always clear which activities add value and which don’t?
No - activities do not always fall neatly into value-added or non value-added categories
Do suppliers play a key role in target costing?
Yes
How must companies always examine pricing?
Through the eyes of their customers
What will value engineering not result in?
The increase in the quantity of non value-added cost drivers
Target costing formula
TC = Selling price - profit margin
What is tear-down analysis?
A process of evaluating a competitor’s product to identify opportunities for product improvement
What is value-engineering?
Evaluating a product’s design in order to identify alternatives that will improve the product’s value
What is business process re-engineering?
A collection of activities that are linked together in a co-ordinated manner to achieve a specific objective
What is Kaizen costing about?
Constantly squeezing the cost by reducing it each month
What is the value chain?
The linked set of value-creating activities from supplier to customer
What is bench marking?
The continuous process of measuring products, services and activities against the best levels of performance
