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The management of Comfort Ltd are exploring the potential to add a new product to their range of office equipment. Whilst Comfort Ltd already manufactures computer stands, they are considering the introduction of a premium portable computer stand to capture some of the increased market demand for such products. Market research has identified that the maximum selling price the market would be prepared to bear is £800. This research has identified customer requirement and the Hard and Soft value functions and these are presented in the table below. The total of the Hard and Soft value functions were weighted at 70%:30% respectively Description % Weighting Projected actual cost £ Hard Durability 20 55 Flexibility 25 80 Weight 40 140 Stability 15 30 Graphics/Design 35 52 20 25 Shape Image 45 63 Comfort Ltd require a profit margin of 45% a) Calculate the target cost and value index for each of the hard and soft functions identifying where Comfort Ltd should concentrate its cost reduction efforts and value enhancement efforts. b) Critically explain how target costing can be used to support cost reduction and/or value enhancement strategy of an organisation. In your answer, draw attention to value engineering and cost driver analysis. Soft The management of Comfort Ltd are exploring the potential to add a new product to their range of office equipment. Whilst Comfort Ltd already manufactures computer stands, they are considering the introduction of a premium portable computer stand to capture some of the increased market demand for such products. Market research has identified that the maximum selling price the market would be prepared to bear is £800. This research has identified customer requirement and the Hard and Soft value functions and these are presented in the table below. The total of the Hard and Soft value functions were weighted at 70%:30% respectively Description % Weighting Projected actual cost £ Hard Durability 20 55 Flexibility 25 80 Weight 40 140 Stability 15 30 Graphics/Design 35 52 20 25 Shape Image 45 63 Comfort Ltd require a profit margin of 45% a) Calculate the target cost and value index for each of the hard and soft functions identifying where Comfort Ltd should concentrate its cost reduction efforts and value enhancement efforts. b) Critically explain how target costing can be used to support cost reduction and/or value enhancement strategy of an organisation. In your answer, draw attention to value engineering and cost driver analysis. Soft
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Answer rating: 100% (QA)
Statement showing Target cost Particulars weights Target cost Actual cost Difference Target selling price 80000 Less target profit margin 45 of 800 po... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
Posted Date:
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