Name: Md. Kamrul Hasan Name: Md. Kamrul Hasan ChowdhuryChowdhury

Roll: 1291Roll: 1291 Semester: 5Semester: 5 thth

USTC

Target costing approach forTarget costing approach forTATA NANOTATA NANO

DefinitionDefinition

Target Costing Target Costing is defined asis defined as a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production, engineering, research and design.

TARGET-COSTING PRINCIPLESTARGET-COSTING PRINCIPLES

1.1. price-led costing. price-led costing. 2.2. focus on customers. focus on customers. 3.3. focus on design. focus on design. 4.4. cross-functional involvement. cross-functional involvement. 5.5. value-chain involvement. value-chain involvement. 6.6. a life-cycle orientationa life-cycle orientation....

Target costing objectivesTarget costing objectives

To identify the cost at which the product To identify the cost at which the product must be manufactured if it's to earn its must be manufactured if it's to earn its target profit margin at its expected or target profit margin at its expected or target selling price. target selling price.

To decompose the production process and To decompose the production process and then then to set cost targets for each product to set cost targets for each product elementelement..

Approaches to target Approaches to target costingcosting

Price-based targetingPrice-based targeting Cost-based targetingCost-based targeting Value-based targetingValue-based targeting

A target cost is the maximum amount of cost A target cost is the maximum amount of cost that can be incurred on a product. that can be incurred on a product.

Target Cost = Market Price – Expected Target Cost = Market Price – Expected MarginMargin

BenefitsBenefits

Delivering the optimal value proposition to Delivering the optimal value proposition to end customers. end customers.

Minimizing product-line complexity. Minimizing product-line complexity. Selecting appropriate product and process Selecting appropriate product and process

technologies. technologies. Lowering Lowering product product design late in the design late in the

innovation process. innovation process. Eliminating cost overruns. Eliminating cost overruns.

TATA NANO a Perfect case ofTATA NANO a Perfect case of

Target Costing approachTarget Costing approach

Use 7 PsUse 7 PsTATA NANOTATA NANO

For fixing up the Terget cost Tata For fixing up the Terget cost Tata Nano use all the 7Ps like:-Nano use all the 7Ps like:-

Purpose Price People Product Place Process Promotion

HOW TATA NANO ACHIVE HOW TATA NANO ACHIVE TARGRT COSTTARGRT COST

1. Cost and waste is driven out of supply chains by 1. Cost and waste is driven out of supply chains by reducing inventoryreducing inventory

2. By simplify the manufacturing process.2. By simplify the manufacturing process.

3. By reducing working capital cost.3. By reducing working capital cost.

4. Eliminated or reduce non-essential part4. Eliminated or reduce non-essential part

5. By establishing proper Supply Chain Network 5. By establishing proper Supply Chain Network DesignDesign

6. Smaller size of car and its component reduce 6. Smaller size of car and its component reduce cost.cost.

7. By the use of Martial substitution ( e.g. 7. By the use of Martial substitution ( e.g. engineering plastic )engineering plastic )

Thank you for attentionThank you for attention