Page 272 - DCOM206_COST_ACCOUNTING_II

Unit 14: Emerging Concepts in Cost Management

3. Facilities Management (physical plant, IT services, office equipment): The case study Notes
shows the introduction of several information technology services and systems for
the various departments of the company.
(a) MatrixOne; used to manage and integrate other IT systems and work processes.
(b) InnovationNet, and intranet which is used to provide access to published
information such as documents, reports, charts and videos.
(c) zTelligence; to conduct market research and online surveys
(d) Marketing resource management software to enable marketers “focus on
creative results-oriented marketing”
4. Human Resource Management (recruiting, training, compensation): P&G began to
use information systems to support how learning occurred within the company. It
created an intranet through which new employees could network with experts,
learn from projects and receive answers to pertinent questions. This system
encouraged experts to share their knowledge with ‘newbies’ through an implicit
compensation or reward system. Further, human resource was provided with tools
they needed to enhance their trade. For example, marketing personnel were given
a platform where they could access data, marketing principles and tools in order to
make sound judgement about a situation.
5. Marketing and Advertising (market research, promotion, advertising): The company
employed the use of knowledge systems to manage marketing. It also uses a very
small information technology group called Virtual Learning @ Procter and Gamble
to develop the marketing for potential new products. Further, it works with marketing
company called Cre8 to put together virtual presentations that demonstrate new
concepts to rapidly prototype new features for current products, and even test how
consumers react to alternative shelf-space designs. Using information technology
in marketing had been ignored in the past because they saw it as complex. P&G’s
various brands, product lines, customers, and even different marketing groups each
used their own independent software for some functions, including email and
marketing campaign management. Currently, using zTelligence, P&G does much
of its market research and surveying online.
Source: http://vivauniversity.files.wordpress.com/2011/09/pg-case-analysis.pdf
14.5 Target Costing

Target costing is a market-driven design methodology and involves estimating a cost for a
product and then designing the product to match the cost.

Target costing is a cost management tool for reducing product costs over its entire life cycle. It
becomes an important reference point for cost management. Target costing includes actions
management must take to establish reasonable target costs, develop methods for achieving
those targets and develop means by which to test the cost effectiveness of different cost-cutting
scenarios.
14.5.1 Several Stages to the Methodology

1. Conception (planning) phase:
(a) Competitive products should be analysed with regard to price, quality, service and
support, delivery and technology. Then it is necessary to establish the features

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