Explain the two methods for reducing total product costs to achieve a desired target cost. Which is more common in the consumer electronic industries? In the specialized equipment manufacturing industries?© BrainMass Inc. brainmass.com March 21, 2019, 7:51 pm ad1c9bdddf
Target Costing, Theory of Constraints, and Strategic Pricing
Explain the two methods for reducing total product costs to achieve a desired target cost. Which is more common in the consumer electronic industries? In the specialized equipment manufacturing industries?
In economics, business, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In economics, a cost is an alternative that is given up as a result of a decision. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this case, money is the input that is gone in order to acquire the thing. This acquisition cost may be the sum of the cost of production as incurred by the original producer, and further costs of transaction as incurred by the acquirer over and above the price paid to the producer. Usually, the price also includes a mark-up for profit over the cost of production.
As per Sprouce, Robert and Mourice "Cost is an exchange price, a foregoing, a sacrifice made to secure some benefit." The Institute of Management Accountants, USA, says "cost is a measurement in monetary terms of the amount of resources used for some purpose." (Nigam B.M.L & Jain I.C. p.19)
Cost has been defined by many experts in different terms, though the crux of all of them remains same i.e. the price you pay to get something. It may or may not be quantifiable.
Cost management means to effectively handle the costs to increase the profit margin of the firm. Nobody wants to do business with low or no profit. All ...
Response helps in discussing Target Costing, Theory of Constraints, and Strategic Pricing