Nissan Target Costing

In: Business and Management

Submitted By diefetteelke
Words 341
Pages 2

Target cost system is ideal for assembly-oriented industries with great involvement in the diversification of product lines, usage of technologies of factory automation, development of systems for reducing cost during all the stages of product’s life cycle such as is the case of Nissan Motor#

Since Nissan cost system is continuously undergoing modification, in the case the target cost cannot be achieved, the products may still be launched if management are still confident that the process of continuous improvement will enable the target cost to be achieved early in the product’s life# so the actual cost can be driven down to the target cost with the help of a multi-disciplinary team.
This cost system is oriented toward the customer which is the most important shareholder in any organization, here the customer requirements together with the target profitability of Nissan, are the primary cost drivers. The very first stage requires market research to determine the customer’ perceived value of the product based in its functions and its attributes (mind-sets to identify design attributes), its differentiation value relative to competing products and the price of competing products. This cost system seems aligned with the plan to obtain the number-one rating in terms of customer satisfaction in the case of Nissan.
The implementation of this system contributes to the awareness and empowerment of all employees involved in all stages of the product and incentives partnerships with suppliers.
Through a value analysis, it is possible to determine the cost of each function, thus the modification or elimination of low cost added-value activities can take place.


For the implementation of target costing the development of detailed cost data and the effective communication and cooperation within involved areas is indispensable.This process is…...

Similar Documents

Lca of Nissan

...two products Life Cycle Assessment of Nissan Cars *ASR: Automobile Shredder Residue. ASR is what remains after material recycling is done to recover as much ferrous and non-ferrous metallic material as possible from the automobile shredder residue. Nissan conducted LCAs since the early 1990s, and made quantitative comparisons to understand the environmental impact of materials that were changed in the following parts. * Radiators * Air conditioners * Front-end modules * Back doors Based on the results of the LCA Project carried out by the LCA Committee of the Japan Automobile Manufacturers Association from October 1997 to March 2001, Nissan reviewed in-house LCA methods and calculated results for major models. * May 2005: Inventory analysis was certified as being in accordance with the LCA method stipulated in JIS Q14040 by the Japan Environmental Management Association for Industry. Models that have undergone LCA: Skyline (made in Japan), Dualis (made in England) To develop more environmentally-friendly vehicles, LCAs are also conducted for new technologies that are introduced. These results are used to achieve the goals set out in the Nissan Green Program 2010* and the Nissan QCT-C* management policy, which clarify our environmental efforts. * *Nissan Green Program 2010: An environmental program that establishes activity plans and specific numerical targets for Nissan to achieve by 2010. *......

Words: 1239 - Pages: 5

Target Costing

...Rebel Ale’s gross margin had eroded far below the targeted 30% that she and Pete had established as a goal. Alex worried that extended sales of Rebel Ale at low margins would cause MSM’s profitability to decline or perhaps vanish. Currently, MSM was charging $1.05 per (18-oz.) bottle of Rebel Ale, $1.50 for Corinthian Bock, and $1.40 for Shiloh Stout. Alex and Pete mentioned their concerns about the Rebel Ale’s declining gross margin to the company’s accountant, Ken McDaniel. After some discussion, Ken suggested that the current plant-wide method of allocating indirect costs might not be the best method to use when different products utilized the productive resources to varying degrees. It was agreed that Ken would investigate alternative costing approaches that could lead to better management decisions, including pricing and marketing. Specifically, Ken mentioned that MSM could probably benefit from using a cost accounting system that more directly traces overhead costs of production and distribution for each label. Cost Analysis After spending time with Alex and Pete and analyzing brewery operations, Ken broke down estimated total annual overhead costs into eight different activities based on last year’s records and anticipated cost increases as shown in Exhibit 1. Also shown in this exhibit are the cost drivers that Ken associated with each activity. Exhibit 2 contains Ken’s estimated total volume for each cost driver for the coming fiscal year (Panel A) and......

Words: 1818 - Pages: 8

Target Costing Process

...price is established. The desired profit margin is subtracted from the target selling price to determine the target cost. If the target cost is below the company’s current cost, the company may decide to introduce the product and functional cost analysis may attempt to reduce cost to an acceptable level. If the target cost is above the current cost, functional cost analysis will make changes and prepare another cost estimates. If the target cost is equal to current cost, company may decide whether or not to introduce the new product. As an example, based on the market condition, TMCA want to produce new model of car named Corolla Ascent 4D Sedan at a selling price of $20,740. 3. Establishing a Target Profit for the product Marketing department plays an important role in determining the target cost of the new product. After estimating the target selling price, the company has to estimate the sales volume in order to calculate the total sales revenue. From the total sales revenue, the desired profit, normally determine by using return on sales, is subtracted. After that the desired profit margin is determined with reference to the company’s long-term strategy. As an example, TMCA estimates its sales volume of 200 units. So, its total sales will be $4,148,000. Based on the long-term company’s strategy, assume that the target profit margin is 32.26%. 4. Determine the target cost The target cost is arriving from subtracting the desired profit from the......

Words: 387 - Pages: 2

Target Costing for Supply Chain Management

...TARGET COSTING FOR SUPPLY CHAIN MANAGEMENT Target Costing is a process to make sure that a product launched with particular functions, quality and price can be made at a cost that would generate a reasonable amount of profit. It is different from the other costing approaches as it is a part of the company’s product development and introduction process. Therefore target costing requires all the information regarding the company’s competitive, product and supply chain strategies. After getting this information, as the company shifts from product strategy phase and introduction process through product concept, all the target costing activities are performed. During the early stages of target costing, the company through the market research statistics, anticipates the price that the consumers are going to pay for their product, by taking its various functions, quality and the substitutes offered by the remaining firms. Depending on this price, the company deducts the profit margin in order to meet the demands of the stakeholders and also to invest for the research and development of new products. The target cost is the maximum allowable cost that the company should incur manufacturing, distributing, servicing and disposing the product. Target costing enables the company to put efforts in order to reach the requirements of the customers. It enables to meet or even to exceed the quality and functionality so that product competitiveness can be attained. Target costing cannot be......

Words: 1007 - Pages: 5

Nissan Motors Lean Leap

...| Nissan Motor Company | Revival Plan Review | | ) | | In 1987 Japan’s economic expansion was driven by the inflation of stock prices and real estate values. As consumer confidence increased, so did the population’s appetite for luxury goods. In response to this national trend in consumer spending, Nissan Motor Company (Nissan) launched an aggressive expansion plan to meet the demands of the marketplace. The organization invested heavily in new manufacturing facilities and upgraded their distribution network. Nissan’s debt grew from $11.8B to $32.7B. Japan’s bubble economy collapsed in the early 1990s and Nissan’s profits deteriorated in parallel (Wiki – 2011). In response to a dire operating situation, Nissan formed a partnership with Renault in 1999. While the injection of capital was much needed by the Japanese car manufacturer, the most important asset exchanged in the strategic alliance turned out to be Carlos Ghosn, the Renault Executive Vice President appointed to turn around Nissan. The following analysis focuses on Carlos Ghosn’s leadership and the Nissan Revival Plan (NRP). The NRP saved Nissan and its roots seem to have originated from the Lean Action Plan framework. Get Started (First Six Months) Find a change agent (Score - 5 of 5) The Lean Thinking textbook places a considerable amount of emphasis on starting the Lean Leap. While it may seem basic in nature, kicking off the process is not easy, and it requires an organization to have an......

Words: 3060 - Pages: 13

Implementing Target Costing

...Accountant 12 March 2002 Implementation of Target Costing and the concerns Target costing is an approach developed by the Japanese companies. It is: “Target costing is the process to determine the maximum allowable cost for a particular new product and then developing the prototype that can be profitably manufactured and distributed for that maximum target cost figure.” Target cost for a particular product can be calculated by starting with the anticipated selling price/target price of the product and less the profit margin required or desired profit as follows: Anticipated selling price – desired profit = Target cost Target costing in fact, is a tool that can be used for managing the costs. Normally, the planners will make use of target costing during product and process design in order to reduce the future manufacturing costs of the product. Concerns about Target Costing: Studies on target costing carried out in Japan have shown that there are several problems that occur in the process of implementing the target costing system. This is true especially in the situation where the company only focuses on the issue of meeting the target cost and ignores the other elements of overall company goals. The problems are: In general, there will be a lot of parties involved in the process of target costing. Due to the reason that everyone is having their own ideas, therefore, conflicts will occur between those who are took part in target costing process. Sometimes the......

Words: 1244 - Pages: 5

Target Costing

...TABLE OF CONTENTS ACKNOWLEDGEMENT 2 INTRODUCTION 3 CONTENT 4 1.0 DEFINITION OF TARGET COSTING 4 2.0 THE PURPOSE OF TARGET COSTING 4 3.0 CHARACTERISTIC OF TARGET COSTING 4 4.0 PRIMARY PROCESS OF TARGET COSTING 5 5.0 LIFE CYCLE COSTING 6 6.0 COST REDUCTION EFFORT 6 7.0 ADVANTAGES OF TARGET COSTING 7 CONCLUSION 9 APPLICATION TO INDUSTRY 9 REFERENCES 10 ACKNOWLEDGEMENT In performing our assignment, we had to take the help and guideline of some respected person, who deserve our greatest gratitude. In the completion of this assignment give us much pleasure. We would to gratitude Dr. Rosiatimah Mohd Isafor giving a good guideline for the assignment throughout numerous consultations. We would also like to expend our deepest gratitude to all those who have directly or indirectly guided us in writing this assignment. Many people, especially our classmates and team members itself, have made valuable comment suggestions on this proposal which gave us an inspiration to improve our assignment. We thank all the people for their help directly and indirectly to complete our assignment. INTRODUCTION Organization might have a number of objectives such as customer satisfaction with the good quality of product that company produced, achieving a high level of market penetration, providing a good work environment to their employees and being able to achieve high revenue. Therefore, there is a number of strategic management accounting techniques that can be...

Words: 2712 - Pages: 11

Acc 227 Week 8 Checkpoint 1 Target Costing

...ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: Contact us at: ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING ACC 227 Week 8 Checkpoint 1 Target Costing Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 8 Checkpoint 1 Target Costing in order to ace their studies. ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: Contact us at: ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING ACC 227 Week 8 Checkpoint 1 Target Costing Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 8 Checkpoint 1 Target Costing in order to ace their studies. ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: Contact us at: ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING ACC 227 Week 8 Checkpoint 1 Target Costing Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 227 Week 8 Checkpoint 1 Target Costing in order to ace their studies. ACC 227 WEEK 8 CHECKPOINT 1 TARGET COSTING To purchase this visit here: Contact us......

Words: 540 - Pages: 3


...Nissan  Leaf   Is  the  Future  of  Transporta0on  really  Fuel   free  with  100%  Renewable  energy?   Fossil  Fuel  consump1on   •  •  •  Oil  accounts  for  33  %  of  all   the  energy  consumed  in  the   world   The  table  below  shows  the   total  consump1on  by  country     Many  experts  project  that   annual  oil  produc1on  will  fall   short  of  consump1on  as  early   as  the  middle  of  the  next   decade.     Rank   Country   Total  (BPD)   Per  Capita     (Lts.  per  year)   1   18,840,000   3,490   2   United  States  of   America   China   9,790,000   425   3   Japan   4,464,000   2,048   4   India   3,292,000   161   5   Russia   3,196,000   1,301   Fuel  consumpNon  rise  increases  the  risk  of  global  climate  change   Carbon  emission  is  the  main  factor  for  rise  in  global  temperatures   Carbon  emission  was  nearly  three  Nmes  in  2014  as  compared  to  1960   Fossil  fuel  dependency  is  very  high  and  sustainability  is  a ......

Words: 477 - Pages: 2

Target Costing, with the full support of the CEO, has concluded that a target costing initiative focused on both new and existing products should be introduced throughout the company. It was agreed by Moonglow management that cost management would have to receive much greater attention “every step of the way” in the development process. During product planning (marketing), as a part of product definition, the product’s selling price, projected volume, and initial “target” cost would be determined. In concept design, rough cost estimates would be assessed and assigned to component or functional blocks. By general design and prototype development, more rough cost estimates would be made to assess whether the target cost could still be achieved. Similarly, in detail design (drawings and specifications) and manufacturing system design (processes, tooling, etc.) detailed cost estimates would continue to be made to assure that the target cost could be met. During each and every step of the development cycle, cost estimates would be made to assure that the target cost was attainable. ● Plan price and cost reductions; ● Develop a formal “estimated cost system”; ● Demand “estimated cost reviews” at each step; ● Continue to develop “team” approach to new product development; ● Measure and learn from experience; ● Develop “value engineering” skills and process throughout the organization; ● Use nontraditional targets and measures to manage cost management process......

Words: 295 - Pages: 2

Nissan Motor Company, Ltd: Target Costing System

...1. What are the strengths and weaknesses of the target costing system? First, target costing originally starts with mangers estimate the cost that customers are willing to pay and how competitor will price the same products or services. (Cost Accounting. Page 545). In the Nissan case, customers are very knowledgeable because the customer demand requires more variations and model types of automobiles. This is a favorable market for Nissan. Nissan managers can set an expected profit margin because the customers has a very high demand of automobiles and they know the automobiles market very well. Second, target costing for a product includes direct manufacturing costs direct materials, direct manufacturing labor, and direct machining costs. (Cost Accounting. Page 519). Analyzing each cost element and eliminate the unnecessary value-added is one of the cost management goals in the target costing system. In order to have a competitive price, Nissan managers have to eliminate some value-added costs which are unnecessary and not so helpful for the automobile manufacturing and selling process. Target costing can shorten the product lives and save Nissan company time to do marketing and financial management. A good example in the Nissan case it that they eliminated the "five-door variant" because it is unnecessary. Last, target costing system helps Nissan build a cross-functional team. The design department, manufacturing department, sales department and management department work...

Words: 1544 - Pages: 7

Target Costing

... thus proving their flexibility in any business environment, whether turbulent or uncertain. Ensuring financial stability also requires adoption and use of an efficient management system. 1. What is Target Costing? Target costing of a product or job is sum total of the variable cost targets fixed for each element of cost (material, labor, power, consumables etc.) required to be incurred for producing that product or job estimated on zero-base principles, plus the fixed cost targeted on the same principles, so that the total cost plus the estimated margin of profit is not more than the price the product is capable of fetching in the market. Zero base principle is the variable cost incurred for producing zero units of the product and from that position what is the incremental variable cost for each unit plus the fixed targeted cost (Rent, Rates and taxes, advertisement, communication etc.) required to set up the facility to produce an estimated number of units. 2.Why is Target Costing important for corporations yearning to have market share and profitable future? The Advantage of Target Costings: 1. We have a cost goal to achieve within the selling price, on realization of which there can be no loss. Cost Optimization: A primary advantage of target costing is that it allows you to analyze the best way to make or acquire products at the lowest costs. Minimizing costs is a common financial goal of any small business, regardless of whether they offer high,......

Words: 1094 - Pages: 5

Target Costing

...INTRODUCTION OF TARGET COSTING Target costing is a system of profit planning and cost management. The required features and performance of the proposed product are established. Then target costing determines the life cycle cost at which the product must be produced, to generate the firm’s desired level of profit. Given the product’s anticipated selling price (Cooper and Slagmulder,1999, p.166). Note that target costing is not a method for product costing , it is a technique for cost management. It was devised in Japan, where it is used widely, particularly in automobile, electrical and equipment-manufacturing industries (Lorino, 1995). With the effect of globalization, it is gradually gaining acceptance in the Western world. EXAMPLE OF TARGET COSTING Let’s assume that the planned selling price of $250 and a planned cost, including upstream and downstream costs, of $200 per unit. The selling price was based on the plan cost per unit plus a planned profit markup of 25% of selling price. If the company had used target costing, the preparation of the life cycle budget and the planned level of profit might have been very different. Let’s say the market research indicated to ACDP that to sell 50 000 units the CD Super would have to be priced at $190. Given this information we can estimate the target cost for CD Super as: Target cost = target selling price – (target profit margin) = $190 – (0.25 X $190) = $142.5 THE TARGET COSTING PROCESS Early in the product planning......

Words: 1127 - Pages: 5

Myproject Nissan

...[pic] Nissan LEAF Ace* Advertising I. SITUATION ANALYSIS • CURRENT USER Since Renault-Nissan is introducing “Leaf” for the first time in Singapore, there are no current users for the product in market. • PRODUCT EVALUATION The Nissan LEAF (Leading, Environmentally friendly, Affordable, Family car) is a fully electric, zero emission, 5-door hatch back car that was introduced in 1999 by Nissan. It was first launched in Japan and United States in December 2010 further in Europe and since then it sold more than 27000 units worldwide. Nissan plans to launch LEAF by September 2012 with an on road price of close to SGD 90,000 after a substantial deduction in COE (Certificate of Entitlement) and other taxes based on TIDE Plus scheme by Singapore Energy Market Authority and Land Transport Authority. • COMPETITIVE ANALYSIS Though the Nissan LEAF has many market competitors in Singapore, its main rivals are the Mitsubishi I-MiEV from the electric vehicles segment and the Toyota Prius C from Hybrid segment. The following is the competitive analysis between these two major brands and Nissan LEAF: |Name/ Specifications |Nissan LEAF |Mitsubishi i-MiEV |Toyota Prius C | |Engine |80 kW, 280 Nm Torque |47 kW, 180Nm Torque |HSD Electric motor~40 kW,......

Words: 2406 - Pages: 10

Data Costing

...single item and prices them accordingly, the fasteners at high profit and its attaching machines at a loss. The cost system allocates the cost of the attaching machines to the fasteners. The Japanese have entered the market and found a way to unbundle the two products. As a result they are challenging the European way of doing business. The case asks the student to analyze the true cost and profitability of the products. MuellerLehmkuhl GmbH HBSP #187048 13p TN #187049 Germany, light manufacturing, 1985 Chapter 4: Job Costing Colorscope, Inc. HBSP #197040 16p TN #198110 Los Angeles, CA, pre-press, 20 employees, 1996 A small company in the graphic arts business faces severe price competition. The company has to respond by cutting costs and making process improvements. Introduces job costing, activity-based costing, cost controls, process improvements, and product pricing concepts in a very simple setting. Chapter 5: Activity-Based Costing and ActivityBased Management Owens & Minor, HBSP Richmond, VA, Inc. (A) #100055 health-care 17p supply, 4,200 TN #100100 employees, 19961999 Insteel Wire Products: ABM at Andrews HBSP #198087 9p TN #198111 South Carolina, steel/wire & nails, 1996-1997 Examines the use of activity-based (or menu) pricing at Owens & Minor (O&M). A manager at O&M, a large national medical and surgical distribution company, enlisted the help of both logistics and cost managers to develop an innovative pricing schedule based on the......

Words: 6264 - Pages: 26

IMDb: 2 HD Bigfoot | The Strangers: Prey at Night streaming movie | Last Exile (1)