Target Costing and Value Engineering

by Cooper, Robin

• ISBN13: 9781563271724
• ISBN10: 1563271729
• eBook ISBN(s): 9781351411769
• Format: Hardcover
• Copyright: 1997-05-31
• Publisher: Productivity Pr
• More Book Details

Summary

In this book you will learn about the practices of seven companies described via case studies, including insights, lessons for adopters, the competitive context that led to implementation, the design of the systems, and the process used. In today's highly competitive environment, your company must learn to develop low-cost, high-quality products that have the functionality customers demand. Target Costing and Value Engineering represents the missing piece in the puzzle of how lean enterprises can successfully compete. What would happen if everyone in your company followed a disciplined approach to cost reduction? What would it look like? How can it be done? With smart cost management, two powerful strategies-target costing and value engineering, will get you well on your way. You will find both strategies included in this comprehensive book, the first in a series which is guaranteed to increase your profits. Cost management must start at the design stage to be effective. As much as 90-95 percent of a product's costs are designed in and cannot be avoided without redesigning. That is why effective cost management programs focus on manufacturing and design. The primary cost management method to control cost during design is a combination of target costing and value engineering. These strategies will help accounting professionals ensure that the products launched by their company are successful, creating added value for the company as well as the customer.

Table of Contents

Foreword	xiii	(2)
Preface to the Series	xv	(6)
Introduction	xv	(1)
The Series	xvi	(3)
The Firms	xix	(2)
Preface	xxi	(4)
Acknowledgments	xxv	(4)
About the Authors	xxix	(4)
Robin Cooper	xxix	(2)
Regine Slagmulder	xxxi	(2)
About the Sponsors	xxxiii	(4)
Institute of Management Accountants	xxxiii	(1)
Institute for the Study of U.S./Japan Relations in the World Economy	xxxiv	(1)
Monitor Company, Inc.	xxxv	(2)
Figures, Tables, Exhibits	xxxvii
Executive Summary	1	(20)
Introduction	1	(2)
The Confrontation Strategy	3	(1)
The Survival Triplet and the Survival Zone	4	(2)
Cost Management in a Confrontation Strategy	6	(2)
Target Costing and Value Engineering	8	(8)
Implications for Western Managers	16	(5)
PART ONE: CONFRONTATIONAL COST MANAGEMENT	21	(50)
CHAPTER 1: How Firms Compete Using the Confrontation Strategy	21	(28)
Introduction	21	(1)
Lean Production and Product Development	22	(8)
The Three Generic Strategies of Competition	30	(6)
Managing the Survival Triplet	36	(3)
Surviving the Transition to Confrontational Competition	39	(3)
Surviving in a Confrontation Mode	42	(4)
Summary	46	(3)
CHAPTER 2: The Role of Cost Management in Confrontation Strategy	49	(12)
Introduction	49	(1)
Managing the Cost of Future Products	50	(3)
Managing the Cost of Existing Products	53	(4)
Harnessing the Entrepreneurial Spirit	57	(2)
Summary	59	(2)
CHAPTER 3: The Research Project	61	(10)
Introduction	61	(1)
The Research Approach	62	(1)
Forming the Project Committee and Research Team	62	(1)
Site Selection--The Series	62	(2)
Site Selection--This Volume	64	(2)
Visiting the Sites and Writing the Case Studies	66	(1)
Analyzing and Synthesizing the Case Studies	67	(4)
PART TWO: TARGET COSTING AND VALUE ENGINEERING	71	(168)
CHAPTER 4: An Overview of Target Costing and Value Engineering	71	(16)
Introduction	71	(1)
Target Costing	71	(9)
Value Engineering	80	(5)
Summary	85	(2)
CHAPTER 5: Market-Driven Costing	87	(20)
Introduction	87	(2)
Setting Long-Term Sales and Profit Objectives	89	(3)
Structuring the Product Lines	92	(2)
Setting the Target Selling Price	94	(6)
Setting the Target Profit Margin	100	(4)
Setting the Allowable Cost	104	(2)
Summary	106	(1)
CHAPTER 6: Product-Level Target Costing	107	(22)
Introduction	107	(1)
Setting the Product-Level Target Cost	108	(11)
Disciplining the Product-Level Target Costing Process	119	(7)
Achieving the Target Cost	126	(1)
Summary	127	(2)
CHAPTER 7: Value Engineering	129	(10)
Introduction	129	(1)
The Organizational Context	130	(2)
Planning the VE Process	132	(1)
VE Techniques	133	(4)
Summary	137	(2)
CHAPTER 8: Component-Level Target Costing	139	(26)
Introduction	139	(1)
Setting the Target Costs of Major Functions	140	(10)
Setting the Target Costs of Components	150	(13)
Summary	163	(2)
CHAPTER 9: Factors That Influence the Target Costing Process	165	(32)
Introduction	165	(2)
Factors That Influence Market-Driven Costing	167	(7)
Factors That Influence Product-Level Target Costing	174	(7)
Factor That Influences Component-Level Target Costing	181	(3)
How the Factors Influence the Target Costing Process	184	(2)
How Some of the Factors Influence Multiple Sections of the Target Costing Process	186	(2)
Comparing the Target Costing Processes	188	(9)
Summary	194	(3)
CHAPTER 10: Target Costing and Value Engineering in Action	197	(24)
Introduction	197	(1)
The Acme Pencil Co. Ltd.	197	(3)
Market-Driven Costing	200	(8)
Product-Level Target Costing	208	(8)
Component-Level Target Costing	216	(3)
Summary	219	(2)
CHAPTER 11: Lessons for Adopters	221	(18)
Introduction	221	(1)
Question One: Is profit management becoming more critical to your firm's survival?	222	(1)
Question Two: Is satisfying your customers becoming more critical to the survival of the firm?	223	(2)
Question Three: Is product design becoming more critical to your firm's survival?	225	(2)
Question Four: Are supplier relations becoming more critical to the survival of your firm?	227	(1)
Question Five: Is cost management the right place for your firm to expend resources?	228	(2)
Question Six: Can you create the right organizational context to support target costing and value engineering programs?	230	(4)
Summary	234	(5)
PART THREE: THE CASES	239	(108)
CHAPTER 12: Nissan Motor Company, Ltd.	239	(14)
Introduction	239	(2)
Introducing New Products	241	(12)
CHAPTER 13: Toyota Motor Corporation	253	(16)
Introduction	253	(1)
Globalization	254	(1)
Supplier Relationships	255	(1)
Cost Planning	256	(1)
Target Costing	257	(1)
Product Planning	257	(1)
Retail Prices and Sales Targets	258	(6)
Value Engineering	264	(1)
Knowing the Effect of Design Changes	265	(1)
From Cost Planning to Mass Production	266	(3)
CHAPTER 14: Komatsu, Ltd.	269	(12)
Introduction	269	(1)
Construction Equipment	270	(1)
Product Development and Design for Manufacturability Cost Studies	270	(4)
Target Costing	274	(7)
CHAPTER 15: Olympus Optical Company, Ltd.: Cost Management for Short Life-Cycle Products	281	(18)
Introduction	281	(3)
Strategic Change at Olympus	284	(12)
Appendix	296	(3)
CHAPTER 16: Sony Corporation: The Walkman Line	299	(14)
Introduction	299	(1)
The Walkman Product Line	300	(3)
The Domestic Market	303	(3)
The Overseas Market	306	(2)
The Target Costing System	308	(1)
New Product Development	309	(2)
Product Costing	311	(2)
CHAPTER 17: Topcon Corporation	313	(14)
Introduction	313	(2)
Ophthalmic Instruments	315	(2)
Topcon's Production Control System	317	(10)
CHAPTER 18: Isuzu Motors, Ltd.	327	(20)
Introduction	327	(2)
Cost-Creation Program	329	(5)
Cost-Down Program	334	(9)
Applying the Techniques	343	(4)
Appendix: Company Descriptions	347	(8)
Glossary of Terms	355	(6)
Selected Bibliography and References	361	(12)
Index	373