Answer to Question #155895 in Management for Prabhdeep

Question #155895

Bring out in detail the relevance of target and Kaizen costing in enhancing corporate performance? illustrate with suitable example?( please answer in 200 to 250 words)


1
Expert's answer
2021-02-01T13:05:23-0500

To begin with, target costing a product cost approximation resultant from a competitive sooq price. The target costing is obtained by subtracting Profit Margin from the Selling Price. Kaizen Costing is the upkeep of current cost levels for goods presently being mass-produced through systematic efforts to achieve the desired cost level. Therefore, both target and Kaizen costing are relevant as illustrated below.

Target costing has been pointed out as a powerful strategy of lean manufacturing companies’ interaction with suppliers. For instance, target costing has a wider role in the lean business system, driving product development and production activities, when combined with kaizen costing. When matched together, the two approaches provide a basis for a total cost-management system during the project’s life cycle in a company. The key idea is to first enterprise the project to an allowable cost consisting of the variance among target price meeting customer’s prospects and the anticipated profit. Cost-reduction interventions are not restricted to the design phase. But rather, they continue to the construction phase where a continuing series of kaizen activities are needed to achieve great product performance and, at the same time, assuring value for the customer at a lower cost. Therefore, combining target and kaizen costing is an influential method for building firms' accomplishment in a competitive market. The process is realized by guaranteeing value for the customer at a low nonetheless still profitable price.



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