Target Costing applies to new products and succeeding generations of a product . It begins with understanding the market thoroughly and an intention to satisfy customer needs, concerning product quality, features, timeliness and price.
Target costing is not just a method of costing , but rather a management technique wherein prices are determined by market conditions, taking into account several factors, such as homogeneous products, level of competition, no/low switching costs.
The difference between the current cost and the target cost is the “ cost reduction ,” which management wants to achieve. A team is formed to integrate activities such as designing, purchasing, manufacturing, marketing, etc. to find and achieve the target cost.
This begs the query “How is the target selling price of a product determined?”
The price of the product is determined by market conditions . The company is a price taker rather than a price maker. The minimum required profit margin is already included in the target selling price. It is part of management’s strategy to focus on cost reduction and effective cost management.
What is attainment phase of target cost?
In target costing process, the cost which is directly influenced by it is given priority, which includes material and purchase parts, tooling cost, conversion cost, development expenses and depreciation.
This begs the inquiry “What is target cost in Cima?”
CIMA defines target cost as “a product cost estimate derived from a competitive market price.”. In industries such as FMCG, construction, healthcare, and energy, competition is so intense that prices are determined by supply and demand in the market.
If the estimated cost is greater than the targeted one, then repeat cost analysis, to reduce the estimated cost. Final decision to be taken, on the introduction of the product, once the estimated cost is on target.
What is a “should-cost” target?
These specific, discrete “ Should-Cost ” initiatives are developed with prudent, cost-benefit-based considerations of associated risks, but without unacceptable reductions in the value received. A program’s “Should-Cost” Target represents what the Program Manager believes the program ought to cost if identified cost-saving initiatives are achieved.
Should cost targets?
A program’s “Should-Cost” Target represents what the Program Manager believes the program ought to cost if identified cost-saving initiatives are achieved. Program Management will develop, own, track, and report against Should Cost targets.
Why is target so expensive?
The main reason why Target is so expensive is down to the demographic they are targeting. Smaller stores in populated city areas attracted urbanized customers who are naturally willing to pay more than communities in rural areas.
Walmart has much more buying power than target…. They can demand a lower buying a price because they can buy more at one time. Target is not necessarily more expensive. Retail surveys have repeatedly shown that the prices are fairly close. In my own experience I have found some items more expensive at Walmart, some at Target.
How has Amazon affected Walmart and Target’s business?
Both Walmart and Target’s efforts to optimize their business models has helped increase their brands and profits, they have also both taken a hit from Amazon. In 2017, Amazon brought in $103.0 billion, which makes them the #3 retailer in the US.
Can I sue Walmart or target for unfair treatment?
Walmart nor Target can punish you for shopping at their competition, that infringes on your basic rights and if they fire you for shopping at another store that is not their brand on your off time you can sue.