Answer to Question #155895 in Management for Prabhdeep

Question

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)

Answer 1

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.