Chapter 3 - Costing Techniques Flashcards
Target costing
Pro-active cost control system
selling price minus target profit
-> in concept and design stages (can be used for existing products to identify cost excesses and to asses if cost planning activities are effective)
Stages: 1 Planning 2. Concept design 3. Basic design 4. Detailed design 5. Manufacturing preparation
Std costing: push system, internal , cost control, reactive
Target costing: pull, external, cost reduction, proactive
Kaizen costing vs target costing
Kaizen during mfg
Achieving cost reductions
Value analysis, value engineering
V-A: systematic, interdisciplinary examination of factors affecting the cost of a product or service
V-E: redesign of an activity, product or service so that value to the customer is enhanced while cost are reduced or at least increased by less than the resulting price increase.
Value types
Cost value
Exchange value (customers willing to pay)
Use value
Esteem value
Method of value analysis
target outcome: reduction of components
- determine function of product and each component of the product
- determine costs of component
- develop alternative solution for function
- analyze components
- evaluate alternatives
- implement
Functional analysis
analysis of the relationships between production functions and their preceived value to the customer and their cost of provision
Value chain (Porter)
Support: infra, HR, Tech, Procure
Primary: inbound logistics, operations, outbound logistics, marketing and sales, service
Competitive advantages (Porter) Evaluate value chain (Shank and Govindarajan)
Comp Advantages
- Low cost strategy
- Differentiation strategy
Value chain:
- identify chain and costs
- diagnose cost drivers
- develop sustainable cost advantage
Life-cycle costing
Berliner and Brimson
Product life-cycle
Design cost of the product
Minimise time to market
Maximise length of life cycle
Life cycle cost budget (5 elements)
development costs design costs manufacturing costs marketing costs distribution costs
