Strategic Approach to Target Costing in Design PPT

This PPT slide, part of the 24-slide 5 Cost Management Strategies PowerPoint presentation, outlines the concept of Target Costing as a strategic approach in cost management, particularly during the product design phase. It emphasizes a feed-forward mechanism that allows organizations to align product design with market expectations while ensuring that desired functionality and quality are maintained.

The process section details 4 key steps. First, it highlights the importance of identifying the price point at which a new product is expected to sell. This step is crucial as it sets the foundation for subsequent pricing and cost decisions. Next, determining the free-on-board price is essential, as it reflects the cost of the product once it leaves the manufacturer. The third step involves establishing the target cost by subtracting the desired profit margin from the free-on-board price. This calculation helps in setting a clear financial target for the product.

The final point encourages teams to look for creative ways to achieve the desired functionality and quality within the established target costs. This aspect of innovation is vital, as it pushes teams to think outside the box and find solutions that can lead to both cost efficiency and product excellence.

The slide also indicates that Target Costing is most effective during the manufacturing phase of a product's lifecycle, particularly when this phase is short. This insight suggests that organizations should adopt this strategy early in the design process to maximize its benefits. Overall, the slide serves as a valuable guide for executives looking to implement a structured approach to cost management in product development.

This slide is part of the 5 Cost Management Strategies PowerPoint presentation.

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Cost Reduction Assessment Cost Management Product Development Manufacturing Innovation

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