2. Introduction
Roller system is an SME specialized in the manufacturing of
components and inline skates. Manufactures components for
distributors, competitors and for the assembly of its own skate
model.
Product
City model is intended for urban use, the removable frame goes
with flexible boot ,allow for easy walking. Its constitutes an
alternative mean of transport.
3. Definition
Target costing : It is a pricing method used by firms. It is defined
as "a cost management tool for reducing the overall cost of a
product over its entire life-cycle with the help of production,
engineering, research and design".
4. In the given case the present scenario is shown as follows
:
Sales price 130x 100,000 = 13000000
Production capacity = 100000
Margin = 20 x 100000 =2000000
Cost = 110x100000 =11000000
5. Indirect Manufacturing cost +
1000000
Fixed cost
+1000000
Cost of components
+7500000
Total costs =
1,10,00,000
Margin +
20,00,000
Direct Manufacturing costs
1500000
6. The marketing departments suggestions for 1,00,000 unit
,selling price =119, cost price =109,margin (M)=10.
Direct manufacturing cost
15,00,000
Indirect manufacturing cost
+10,00,000
Fixed cost
+10,00,000
Cost of components
+74,00,000
Total cost =
1,09,00,000
Adding up the margin cost
+1000000
7. When we want to produce 200000 units with the selling
price = 120.
Direct manufacturing cost
17,25,000
Indirect manufacturing cost
+12,00,000
Fixed cost
+10,00,000
The cost of component is divided into 2 combinations