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Unit 14: Emerging Concepts in Cost Management
4. Target costing is also used to forecast future costs and provides motivation to meet future Notes
cost goals.
5. Target costing is used to control costs before the company incurs any production costs
which save a great deal of time and money. Furthermore, target costs may be used
continually to control costs throughout the production life cycle.
Self Assessment
Fill in the blanks:
8. …………………… is a market-driven design methodology and involves estimating a cost
for a product and then designing the product to match the cost.
9. Target costing is most effective in the …………………… and design phases of new products.
14.6 Kaizen Costing
Today, companies in industries such as electronics, automotive and high-tech are under increasing
pressure to cut costs. Faced with ever-growing competition, these industries are beginning to
open up their supply chains to take further steps to meet market demands for lower prices. Now,
they consider it about time that suppliers began to pull their weight. An increasingly well-
developed outsourcing strategy means that suppliers achieve greater added value while
manufacturers, with declining added value, become extremely sensitive to price changes.
Figure 14.3: Complete Life Cycle
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