1. Target Costing  Cost plus pricing is more appropriate when the market demand exceeds the supply.  However when the market competition is increased supply exceed the demand factor of the market and there by price comes down to penetrate the market.  Market is the price setter and company is the price taker.

2. Price/Cost relationship in competitive market

3. Underlining concept of target costing “Market price- desired profit margin= Target cost”

4. Back ward analysis of cost  Current situation Market price 22.00 DM 10.00 Margin (8.00) DL 7.00 Target cost 14.00 POH 3.00 Cost 20.00 +Margin 40% 8.00 Selling price 28.00

5. Early cost planning Chartered Management Accountant USA define ……….

6. The establishment phase of target costing

7. How to achieve the target cost  Product innovation  Process innovation  Design innovation  Resources innovation  Value chain analysis

8. Life cycle costing Target costing places great emphasis on controlling costs by good product design and production planning, but those up ‑ front activities also cause costs. There might be other costs incurred after a product is sold such as warranty costs and plant decommissioning

9. Life cycle costing PhaseType of cost DesignResearch, development, design and tooling ManifactureringMaterial, labour, overheads, machine set up, inventory, training, production machine maintenance and depreciation OperationDistribution, advertising and warranty claims End of life Environmental clean-up, disposal and decommissioning

10. Example A company is planning a new product. Market research information suggests that the product should sell 10,000 units at $21.00/unit. The company seeks to make a mark-up of 40% product cost. It is estimated that the lifetime costs of the product will be as follows: Design and development costs $50,000 Manufacturing costs $10/unit End of life costs $20,000 Required (a) What is the target cost of the product? (b) What is the original lifecycle cost per unit and is the product worth making on that basis?

11. Kaizen-Process of continues improvement ZEN= GOOD 11 KAI=Change One of the most notable features of kaizen is that big results come from many small changes accumulated over time. However this has been misunderstood to mean that kaizen equals small changes. In fact, kaizen means everyone involved in making improvements. While the majority of changes may be small, the greatest impact may be kaizens that are led by senior management as transformational projects, or by cross- functional teams as kaizen events.big results come from many small changes accumulated over timekaizen events

12. The Deming Cycle Hill, T. 2005, “Operations Management, 2 nd Edition”, Palgrave Macmillan

13. Kaizen Costing The process of cost reduction during the manufacturing phase of an existing product. 31/3/201501/07/2016.. Current year cost base. Cost base for next year. Product cost

14. Kaizen Costing The process of cost reduction during the manufacturing phase of an existing product. 3/31/0x.. Product cost } Kaizen goal cost-reductionamount.