The document discusses how different industries implement target costing to meet customer expectations. It provides examples from the automotive, technological, circuit board, and banking industries. In the automotive industry, Toyota uses kaizen costing where teams work together to ensure product costs allow for profitability at the required market price. In technology, HP uses target costing in printer development to balance performance and costs as product lifecycles shorten. PCB manufacturers negotiate with suppliers and use value engineering to achieve target costs. The Central Bank of Morocco implemented ABC to improve performance, quality of service, and understand costs better for strategic planning.

1. How company set target
costing to meet customer
expectation by different
industries
5520212002 : Nabduan D.
5520212004 : Phornpat R.
5520212007 : Raveepitchaya R.
5520212009 : Ata K.

2. Target Cost =
Expected Selling Price – Desired Profit
Target costing
The establishing phase of Target Costing

3. AUTOMOTIVE INDUSTRY

4. • KAIZEN – is a Japanese word and means
continuous and gradual cost improvements by
means of business betterment of activities.
Target costing in Toyota
• By using kaizen costing, teams of people from
marketing, engineering, purchasing,
manufacturing and accounting work together to
assure that a cost position of the product is such
that the company can sell product at its required
market price and make money by doing it.

5. KAIZEN

6. Toyota Motor Manufacturing UK Ltd
• Toyota Motor Manufacturing UK Ltd (referred to as TMUK
here) started production in December 1992 in the Bumaston
plant in South Derbyshire. It employs 1,300 people and had a
production volume of 35,000 cars in 1993. TMUK presently
manufactures the Carina E model, whose production volume
reached 100,000 in 1994, thereafter progressing to the
200,000-1evel plant capacity. Target cost management at
Toyota for this model is an involved and complex process
entailing information (and parts) exchange between TMUK,
Toyota Motor Europe Marketing and Engineering (or TMME)
based in Belgium, and Toyota Motor Corporation in Japan
(TMC).

7. The departmentalization of target costing
responsibility in Toyota Motor Manufacturing UK
Ltd
• Department of Accounting and Finance gathers information for sales
forecasting purposes and profit improvement efforts.
• Department of Purchasing is more directly engaged in pursuing target
costs.
Department of Accounting and Finance which is segmented into:
• Sales and Planning (five people) concerned with reviewing European sales of
the model and aggregating medium and long-term planning data.
• Financial Accounting (12 people) responsible for debtor/creditor records, sales
invoice and tax processing and general cash management.
• Management Accounting (12 people) to oversee costing, fixed asset and
inventory administration, cost-reduction plans, profit improvement controls, and
cost management, which entails the preparation of budgets.

8. Target Costing and Kaizen

9. TECHNOLOGICAL INDUSTRY

10. HP at a glance
• HP (Hewlett-Packard)
– Expert in technology product
– Provider service for SMBs and government

11. HP printing product at
Vancouver Division
• Purpose to research and develop new printer
include inkjet and dot-matrix printer.
• HP was the pioneer in inkjet technology, later it
become very successful technology

12. HP Printing product
• HP Printing and Personal Systems strategy (HP PPS)
focused on combine supply chain and reduce number of
sale teams. And Reduce number of SKU by break down
the work and reduce support team.

13. Product life cycle
• technology product life cycle become shorter and shorter

14. Product life cycle
• technology product life cycle become shorter and shorter
• Customer expectation are high
• To maintain and go higher position

15. Product life cycle
• Development state:
– Most of cost incur in this state in because of it require a lot of
money in product design and purchase materials.
– In order to reduce cost you should set target cost for internet,
how you allocate cost into each department, and external cost to
get information it require collaboration of procurement and
supplier to exchange necessary information.

16. Product life cycle
• Introduction state:
– The product are not acknowledge from people. It look
people not know you product. Marketing investment is
important in order to attractive more people.
• Growth state:
– In this state technology is stable. Your product get
more attractive from people, they trust the product.

17. Product life cycle
• Maturity state:
– Peak of old technology. Time to go to next state depend on the
market.
– The company should plan to discount and develop new product.
• Decline state:
– The product became obsolete. Time to get the plan into action.
– Maintaining customer loyalty the company can’t stop
immediately they should provide support to customer for a while
to make sure they ready to buy the new one.

18. Target costing in
HP printing product
• Printing product are price sensitive
• Procurement engineers
– interpret what R&D want into purchasable thing
– co-working with supplier, working closely with they
can induce them to provide insight cost information
• Supplier reward plan
• Establish current and predict target costing

19. How to implement target costing
• Target costing require more personal and department
responsibility to achieve it
• To ensure that you cost will not excess
– Fine alternative supply who has less bid
– Shouldn’t approve the project that consuming cost
more than target even it look good
– Set up project driven team

20. How to implement target costing
• Step of implement target costing
– Market research
– Set selling price
– Set target cost – include internal and external cost
– Evaluate and feedback
• In some case to achieve target cost you might consider
to re-design or change product requirement.

21. Benefit of target costing
• Certainly continuous cost reducing
• Bargaining power with supplier
• Target costing are changeable
• Make you product more attractive
Drawback of target costing
• Increase work pressure
• Balance performance and cost
• Hard to control external cost

22. Recommendation
• To understand more about cost behaviors the company
need more tools as ABC (Activity based costing) to show
how each pool cost.
• Evaluate cost and dead line carefully: in order to don’t
put more pressure to a department. Cost are
unavoidable to develop product

23. CIRCUIT BOARD INDUSTRY
Printed Circuit Board Manufacturer (PCBM)

24. PCB manufacturer History
• Providing for PCB Prototypes and medium
scale PCB production with quality, quick
turn-around times, and low prices
• It is mechanically supports and electrically
connects electronic components.
• Using conductive tracks, pads & other
features etched from copper sheets
laminated onto a non-conductive substrate
• By experienced engineers and helpful
support staff would be ensure that
customer get products made exactly to
customer specifications

25. PCB manufacturer History (Cont.)

26. PCB manufacturer processing
• Engineering planners to decompose target cost into each
cost element and use value engineering to achieve the
target cost and illustrate the process of determining target
costs using production and cost figures.
• Improving by Valued Engineering (VE)
- reduce material cost
- reducing material moving distances between receiving to
delivering area to user's area.
• By purchasing department of PCBM, they have a long negotiation
process with the suppliers to persuade buying power to order at
lower prices.

27. • The result of improvement activities : reduction of $1 per
unit cost
• Activity-based costing (ABC) system
– supporting price change when customer requires
different designed (require tab plating)
– no charged cost to customer’s order for this option
– helped PCBM received credibility regarding the price
quotes from the customer
– customer agreed to consider a price increase in the near
future
PCB manufacturer processing (Cont.)

28. PCB manufacturer: Key success factors
• Purchasing department has good relationship with
suppliers so they could be strong negotiation to order
low costing price of material.
• Reduce manufacturing costs by created awareness of
Valued Engineering to leaders
• Using Activity-based costing (ABC) system to support
and cover costing price change when customer requires
different designed. Keep customer retention because
price is not changed and also achieve customer
expectation in same quality as well as same price.

29. PCB manufacturer: Obstacles
• PCB manufacturer cannot reduce completely in gap of
allowance cost and cost management occurred.
PCB manufacturer: Recommendation
• PCB manufacturer should offer target costing knowledge to
every employees or level to understand exactly of benefit of
target costing and they will work by alignment direction
working, as Sony and Toyota.

30. Banking Industry
The Central Bank of Morocco

31. • Established in 1959 with the head quarter in Rabat, Morocco.
• As the replacement of the former Banque d’Etat du Maroc
• To issue banknotes and coins under legal tender along with set
up monetary policy and regulation to ensure price stability
• The alliance for financial inclusion is the world's largest and
most prominent network of financial inclusion policymakers from
developing and emerging economies who work together to
increase access to appropriate financial services for the poor.
Bank Al-Maghrib History

32. Why the Central Bank of Morocco plan to implement ABC?
• To upgrade capacities in competes in international as the strategic
plan cover from 2004 to 2006.
• To set the new standard in action plan of the organization to
established a policy in manage the activities to improve
performance and quality of service.
• To be modernizing organization to have equipment to understand
clear cost calculation to perform financial service.
Bank Al-Maghrib

33. • The bank purchasing package software for ABC system with the
concerning on the accessibility of employees to the system
• The manager also well cooperate in the project with consultant
• The Bank of France support in technical assistance and training
(Bank of France also as one of the first central bank to use ABC)
• implementation ABC in four levels of activities including Activity
Analysis (AA), Activity Cost Analysis (ACA), Activity Base
Costing(ABC) and Activity Base Budgeting.
Bank Al-Maghrib
How to implement ABC in the Central Bank of Morocco?

34. Bank Al-Maghrib
How to implement ABC in the Central Bank of Morocco?
Activity Base Budgeting (ABB)
Using ABC to plan on ABB
Activity Base Costing (ABC)
Using information from AA and ACA to analyze ABC
Activity Cost Analysis (ACA)
Information added the explanation in cost of activity
Activity Analysis (AA)
Identify activity and process in convert labor, material and other resource to be output

35. Bank Al-Maghrib
How to implement ABC in the Central Bank of Morocco?
To identify cost through different
department
• 7 primary departments
in charge for the bank
basic tasks
1) monetary operation
and exchanges
2) banking supervision
3) network and corporate
relation
4) industrial to
responsible for banknote
production
5) currency museum and
research
• 5 support departments
1) audit and risk
prevention as controlling
department.

36. Bank Al-Maghrib
How to implement ABC in the Central Bank of Morocco?
To learn ABC with the
support from
consultant team with
the flow of information
circulating in different
department in
organization.
To analyzed and the
observe and recorded
to be the evidence of
decision making
under ABC
information
To interview the
position in charge
including managers,
consultants, and
department head to
confirm result during
phrase 2.

37. • Staff satisfied with new ABC system
• The research found that the support departments uses this
information more than primary departments
• The better flow in ABC information then contact with all
departments
• The applying of ABC can bring benefit to the bank in
improvement in data processing
• The better ability to track down change in cost and profit margin
and cost performance, and product from similar family
• The better ability to focus on higher profitability customer with
lower relevant cost.
Bank Al-Maghrib
The result of implementation ABC?

38. Bank Al-Maghrib
The Benefit of implementation ABC ?
Financial
improvement
• increasing in profit by
remove the no value-added
activities by better in select
contractor, reducing lead
time, improving efficiency in
utilize resource
Organization
performance
• improvement in
communication across
different department can
caused from the better ability
to control cost of non-quality
in poorly organized activities
lost in excess demand of
customers and lost to redo
and correct customer’s order

39. Bank Al-Maghrib
Key Success Factors / Obstracles / Recommendations
KEYSUCCESSFACTORS
• Level of
technological
equipment
• Cooperation
among
employee
• Accurate
analysis skills
• Reengineering
structure
• Good
relationship
• Management
intention
OBSTACLES
• Investment in
technological
advancement
• Skills of
employee in
analyzing
relevant
information
• The more
complex service
provide the
more difficult to
identify cost
RECOMENDATIONS
• Regular basis in
software
upgrade is
needed
• Accurate
measurement is
needed
• Accurate ability
to link data to
analysis is
needed
• Concern more
on non-banking
system

40. Key success factory Obstacle
1. structured problem-solving
approach somehow based upon
the Plan-Do-Check-Act circle, thus
preventing “jumping to conclusions”
2. Working through those steps with
a bottom up approach; which is
fundamentally different for most of
the Western companies where
“experts” tend to bring solutions top
down into the organization.
-
TOYOTA

41. Key success factor Obstacle
1. work awareness to procurement
2. Supplier loyalty: give a reward to
supplier when they can meet
cost target and quality by offer
more order in the future.
1. More pressure to R&D, how
R&D launch the product meet
quality and functionally with
very low cost.
2. Balance performance and cost:
3. Hard to control external cost
HP

42. Key success factors Obstacle
1. Good relationship with
suppliers
2. Reduce manufacturing costs by
created awareness of Valued
Engineering to leaders
3. Using Activity-based costing
(ABC) system to support and
cover costing price change
when customer requires
different designed.
1. PCB manufacturer cannot
reduce completely in gap of
allowance cost and Cost
management occurred.
Printed Circuit Board Manufacturer
(PCBM)

43. Key success factory Obstacle
1. Technology Advancement
2. Cooperation among staff and in
charge person
3. the ability of management
4. the structure of the organization
5. Processes management
6. Relationship management
7. Management intention.
1. the investment in advance
technology that quite high to
purchase
2. the well trained employee need to
be ensured in skill to analyze or
use the ABC
3. the more differentiate service
provide lead to the more complex
costing analysis
Bank Al-Maghrib