This document discusses responsibility centers and product life cycles. It defines responsibility centers as entities within an organization that are responsible for managing revenue, expenses, and investment funds. There are four main types of responsibility centers: cost centers, profit centers, investment centers, and revenue centers. The document also discusses target costing, which is setting a target cost for a product based on the desired selling price and profit. It outlines the objectives, applications, and limitations of using target costing. Additionally, the document covers value chain analysis and Porter's value chain model for analyzing a firm's activities to identify sources of competitive advantage. Finally, it defines transfer pricing as the price charged between different parts of the same company.

2. PRODUCT LIFE CYCLE

8. RESPONSIBILITY CENTER

9. What is Responsibility center
 Entity within an organization that holds responsibility for
the management of revenue, expenses, and investment
funds.
 This center is controlled by a responsibility manager that
works with other individuals in the organization to establish
procedures and accounting practices to ensure that the
necessary expense and revenue information is reported
accurately.
 The responsibility center will also work with accountants
to make sure that the organization is meeting requirements
set by the Internal Revenue Service.

10. 4 Types of Responsibility Centres

12. Target Costing
• A target cost is the allowable amount of cost that can be incurred on
a product and still earn the required profit from that product
Target cost is the cost that can be incurred while still earning
the desired profit
 Selling price – desired profit = target cost
The customer sets the price
Profit must be achieved through cost control

13. Application Of Target Costing
• Industrial units having assembly orientation.
• Firms largely involved in diversified product lines.
• Firms using Technology for automation of production
process.
• Firms using modern techniques such as value engineering,
just-in-time approach, Total quality management.

14. OBJECTIVES OF TARGET COSTING
• It enables firms to manage business in profitable manner and
in Competitive Environment.
• Target costing is a very comprehensive cost planning therefore
firms are very conscious in fixing cost of various components.
• It emphasizes in understanding the market and competition
both.
• Target costing help to meet customer need according to
preference. It helps in increasing the value of firm.

15. Limitation Of Target Costing
• To achieve the target cost, there remains much work
pressure on workers to achieve production targets.
• It does not work very effectively in long run as new
products and upgraded technology will prevail
• Future environment is uncertain in terms of demand, if
demand increases it will be difficult to get efficiencies.

16. VALUE CHAIN ANALYSIS
Value chain analysis is a strategy tool used
to analyze internal firm activities. Its goal is to
recognize, which activities are the most valuable (i.e.
are the source of cost or differentiation advantage) to
the firm and which ones could be improved to
provide competitive advantage.

17. PORTER’S VALUE CHAIN MODEL

18. COMPETITIVE ADVANTAGE TYPE
COST ADVANTAGE
• This approach is used when organizations try
to compete on costs and want to understand
the sources of their cost advantage or
disadvantage and what factors drive those
costs.
• Step 1. Identify the firm’s primary and support
activities.
• Step 2. Establish the relative importance of
each activity in the total cost of the product.
• Step 3. Identify cost drivers for each activity.
• Step 4. Identify links between activities.
• Step 5. Identify opportunities for reducing costs.
DIFFERENTIATION ADVANTAGE
• The firms that strive to create
superior products or services use
differentiation advantage approach.
• Step 1. Identify the customers’
value-creating activities.
• Step 2. Evaluate the differentiation
strategies for improving customer
value.
• Step 3. Identify the best sustainable
differentiation.

19. What is Transfer Pricing ?
It’s a term used to describe aspects of intercompany pricing
& arrangements between related business entities &
commonly applies to intercompany transfers tangible
property, intangible property services & finance transfers.

20. Objectives of Transfer Pricing
• Reduction of taxes and tarrifs.
• Management of cash flows.
• Minimization of foreign exchange risks.
• Competitiveness in the international marketplace.

21. Transfer Pricing
• The price that is assumed to have been charged by one part of the
company for products & services it provides to another part of the
company . In order to calculate each division’s profit & loss separately.