Wednesday, May 6, 2020

Target Costing Versus Customer Profitability Analysis

Introduction A manufacturing company in Coventry which is using traditional management accounting has asked for advice on improving operational performance. Following we introduce two contemporary developments (target costing and customer profitability analysis) and detailed analyze customer profitability analysis. Target Costing versus Customer Profitability Analysis (CPA) Target costing is an aggressive profit and cost management strategy implemented in the earliest stage of new product development. Different from conventional cost plus pricing methods in which the managers decide the prices based on existing costs. Target costing takes a different approach to identifying the price, profit and effectively control cost. In this process, the functional design and pricing strategy of a new product will be planned before cost and profit accounting. As Figure 1 revealed, based on market research, the analysis of market competition and willingness of target customers in paying each function will be taken as two criterions guiding the design of products. The positioning and pricing should be closely linked to each other in order to engage the product in target groups. Afterwards, with the restriction of price, the profits and costs involved in manufacturing and selling will be balanced. The profit m argin, which is estimated from expected return of investment from shareholders, is an indicator for managers to determine the proportion of profits and costs. Since theShow MoreRelatedEssay on Nissan Motor Company992 Words   |  4 PagesMotor Company – Target Costing System – Extra Question 1 – What is the purpose of Nissan’s target costing system? Nissan deployed target costing system to achieve following benefits Systematic approach: The purpose of the target costing system is to have a systematic procedure to manage costs for new product introductions in order to allow them to earn the necessary profit margin to meet corporate profitability objectives. Customer Orientation: Target costing promotes customer focused ratherRead MoreAcc 206 Final1520 Words   |  7 Pagesfashion, with the expected end target being to triple the current levels. The plan is to push sales into the targeted range of $3 million within 3 years versus the current amount which sits at $1.2 million. We will identify the perceived risk factors that may impact this aggressive strategy and its successful execution. The following will be those risk factors: i. Risk of product not meeting customer demands/expectations ii. Acceptability risk of customers with the new product being released Read MoreAbc System26363 Words   |  106 PagesC H A P T E R F I V E INTRODUCTION TO COST MANAGEMENT Activity-Based Costing and Management After studying this chapter, you should be able to . . . 1. Explain the strategic role of activity-based costing 2. Describe activity-based costing (ABC), the steps in developing an ABC system, and the beneï ¬ ts and limitations of an ABC system 3. Determine product costs under both the volume-based method and the activity-based method and contrast the two 4. Explain activity-based management (ABM)Read MoreStrategic Management Accounting: Adapting to the Changing Needs of Business2686 Words   |  11 Pagesattribute costing, brand value budgeting and monitoring, competitor cost assessment, life cycle costing, quality costing, strategic costing, competitive position monitoring, competitor appraisal based on publish financial statements and value chain analysis. This paper will review some of these recommendations that have had impact on development of strategic management accounting. The term SMA was coined by Simmond (1981, 1982). Simmonds (1981) defines the concept as the provision and analysis of managementRead MoreAldi s Performance Based On Their Current Strategy1742 Words   |  7 Pagescurrent competitive market. The report will identify the mission and fundamental objective of the company. Furthermore, the report draws attention to the analysis of strategies of ALDI and evaluates the performance of their current strategy by using Porters cost leadership and differentiation strategy. In addition, the report provides an analysis of external fit with the help of Porters Five competitive forces and ALDI’s existing performance against their FO. Finally report will conclude with fewRead MorePillsbury: a Tale in Management2520 Words   |  11 PagesWritten by: Louis Maatiaha Tangiia Pillsbury: A Revolutionary Tale In Management Assignment: Pillsbury Customer Driven Reengineering Date: 28/04/2013 Student Name: Louis Maatiaha Tangiia Student ID: 4594096 Abstract This report discusses the Pillsbury Company s reasons for changing their strategy and assessment of the new strategy using Value Chain Analysis and Activity Based Costing . A brief history of Pillsbury and its old strategy is outlined initially. The discussion then focuses onRead MoreMaf6803408 Words   |  14 PagesCUSTOMER PROFITABILITY ANALYSIS Customer profitability analysis (CPA) can be defined as a method used to compare the costs of all the activities used to support a customer or a customer group with the revenue generated by that customer or customer group. It is the analysis of the revenue and costs that relates to the customers which can be determined by considering the similarities and differences in customers’ buying behaviours and customer preferences. From the definition, it shows three featuresRead MoreStrategic Cost Management and the Value Chain2097 Words   |  9 PagesStrategy. From the article also, Shank and Govindasamy stated that the primary focus of a low cost strategy is to achieve the lowest cost comparative to competitors while the main focus of the differentiation strategy is to create something that customers perceive as being unique. Furthermore, the framework of the value chain is for breaking down the chain into strategically relevant activities. Methodology There are two (2) main steps involved in the Value Chain which are to identify the value chainRead MoreRole of Management Accountant2600 Words   |  11 Pagesreferences (Total 8 pages) ANNOVIM PLC ANNOVIM PLC INTRODUCTION Managers in Annovim Plc have to understand since the early 1980s a number of ‘innovative’ management accounting techniques have been developed such as activity-based techniques (costing, budgeting and management), strategic management accounting and the balanced scorecard. From the context of the assignment, each division is regarded as a profit centre, where the divisional managers of the three divisions i.e. candy bars, chews andRead MoreProductivity and Quality4407 Words   |  18 PagesActivity Based Costing for Activity Based Management Meiklejohn Paul, Director Management Consulting 17 February 2012 Agenda 1. What is Activity Based Costing (ABC)? 1.1 What is ABC and Why should it be used? 1.2 Traditional costing vs ABC 1.3 Activity based costing processes 2. How ABC should be used to manage (Activity based management)? 2.1 When to use ABC? 2.2 How to use ABC for ABM? 2.3 Scoring High - Low value adding activities 2.4 Activity Based Management applications 3. ABC/ABM implementation

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.