Target Costing (PowerPoint PPTX Slide Deck)

COST REDUCTION ASSESSMENT PPT DESCRIPTION

Explore Target Costing strategies in this expert PPT by an ex-McKinsey consultant. Learn cost management techniques to enhance profitability early in product development. Target Costing is a 23-slide PPT PowerPoint presentation slide deck (PPTX) available for immediate download upon purchase.

Explore Slides inside the Deck:

Product-Level Target Costing: Key Steps and Strategies Key Features and Benefits of Target Costing Comprehensive Overview of Target Costing Phases

Target Costing is a proactive Cost Planning, Cost Management, and Cost Reduction practice. Costs are planned and managed out of a product and business early in product life-cycle, rather than during the later stages.

Target Costing is an organized process to determine the cost at which a proposed product must be developed so as to generate profits at the product's anticipated selling price in future.

This presentation provides a detailed overview of the Target Costing Process and its 3 key phases:

1. Market-Driven Target Costing
2. Product-Level Target Costing
3. Component-Level Target Costing

This deck also deliberates on the key features and advantages of Target Costing, the factors influencing the approach, and its applications in various industries. Target Costing is a superior approach to Cost Reduction and Control.

The slide deck also includes some slide templates for you to use in your own business presentations.

Target Costing is essential for maintaining profitability in a competitive marketplace. This framework emphasizes the importance of setting cost targets early in the product development process to ensure that the final product meets market demands while achieving desired profit margins. By focusing on cost management from the outset, companies can better control expenses and optimize resource allocation.

This presentation also highlights the role of cross-functional teams in achieving target costs. Integrating activities such as design, procurement, and manufacturing ensures that all aspects of the product lifecycle are aligned with cost objectives. The included templates provide practical tools for implementing Target Costing in your organization, making it easier to apply these principles and drive cost efficiency.

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COST REDUCTION ASSESSMENT PPT SLIDES

Product-Level Target Costing: Key Steps and Strategies

This PPT slide outlines the second phase of the Target Costing Process, focusing on product-level target costing. The goal is to align product design with allowable cost parameters to meet customer expectations. This phase transforms allowable costs into actionable target costs, pressuring product designers to optimize costs. Key components include establishing a product-level target cost, which must consider design capabilities and realistic manufacturing costs. Discipline in monitoring the relationship between target costs and estimated product costs is essential. The cardinal rule states that total target costs at the component level must not exceed the overall product target cost. Methods for achieving target costs include Value Engineering, Design for Manufacture and Assembly, and Quality Function Deployment, ensuring products meet financial constraints while maintaining quality and performance standards.

Key Features and Benefits of Target Costing

This PPT slide outlines target costing, a strategic approach to pricing and cost management where sellers act as price takers, aligning pricing strategies with market expectations. The target selling price incorporates a desired profit margin, ensuring profitability from the outset. Product design integrates customer expectations, essential for meeting market demands. Effective cost management is a cornerstone of this strategy, with the difference between current costs and target costs referred to as "cost reduction--Drift," which management seeks to minimize. Achieving target costs requires collaboration across design, purchasing, manufacturing, and marketing functions. Target costing enhances customer value by developing products based on expectations, improving operations, and fostering innovation. This methodology identifies new market opportunities, focusing on delivering the best value for money while maintaining profit margins in competitive environments.

Comprehensive Overview of Target Costing Phases

The Target Costing process is a comprehensive cost reduction program divided into 3 phases: Market-Driven Target Costing, Product-Level Target Costing, and Component-Level Target Costing. In Market-Driven Target Costing, the selling price is determined by analyzing market conditions and the industry value chain, requiring alignment with the firm's strategy and financial goals to set a desired profit margin. This selling price helps derive allowable costs for subsequent phases. Product-Level Target Costing refines initial cost savings into achievable target costs, emphasizing product design that meets customer needs within allowable cost constraints. Component-Level Target Costing involves a cross-functional team collaborating to reduce costs across design, purchasing, and manufacturing, highlighting the importance of a supplier-focused strategy. Successful implementation of Target Costing requires analyzing costs throughout the product lifecycle, integrating market analysis, product design, and cross-functional collaboration to enhance profitability.

Strategic Framework for Target Costing Implementation

This PPT slide visualizes Target Costing as a financial goal for managing product lifecycle costs. Key elements include current market price, actual cost, and desired profit, which inform the target cost. The left side illustrates the relationship between market price and actual cost, highlighting profit margins and the term “Drift,” indicating potential misalignment that necessitates adjustments for profitability. The right side outlines expected market price and desired profit, establishing the target cost, emphasizing that market forces dictate selling price. This requires proactive measures in design and development to meet target cost parameters. Achieving target cost influences design decisions and operational efficiencies, helping organizations navigate market fluctuations and enhance financial performance.

Strategies for Effective Target Costing Implementation

The Target Costing Process emphasizes Value Engineering (VE) in achieving target costs while enhancing product functionality and quality. Four strategies for product development are outlined: Zero-look, First-look, Second-look, and Teardown. The Zero-look strategy applies during the concept proposal stage, focusing on innovating new functionalities. The First-look strategy optimizes existing products by modifying materials and designs to enhance performance and reduce costs. The Second-look strategy identifies cost-reduction measures for products that do not meet target costs during production. Lastly, the Teardown method involves disassembling a product to analyze components, allowing for comparisons with competitors and identifying design improvements or cost savings. Each method offers unique advantages for achieving target costs.

Source: Best Practices in Cost Reduction, Cost Management, Cost Analysis PowerPoint Slides: Target Costing PowerPoint (PPTX) Presentation Slide Deck, LearnPPT Consulting