What are the key steps to determine the target manufacturing cost per unit for a new product?

Question

BlackTom AI · Accepted Answer

The question asks for the key steps to determine the target manufacturing cost per unit for a new product.

Since the provided data includes no list of answer options, I will focus on explaining the standard reasoning behind target costing and evaluate the single given option for consistency with that approach.

Option provided: 'e) Establish the product’s market price, then subtract the sum of the development costs over the initial estimated sales volume, delivery costs, all non-manufacturing costs including corporate allocations, and desired profit, to determine the target manufacturing costs.'

First, the core idea of target costing is to start from the market or selling price and work backward to determine what the manufacturing cost per unit must be in order to achieve a desired profit, given non-manufacturing costs and development expenses. The steps typically include: 
- Determine the target selling price (often based on competitive pricing and customer willingness to pay). 
- Subtract the desired profit (or margin) to get the target cost that must be available for all costs incurred to deliver the product. 
- Subtract non-manufacturing costs (such as marketing, distribution, general and administrative, and development/ROA allocations) from that amount. 
- The remainder is the target manufacturing cost per unit.

In light of this framework, the reasoning in the option aligns with the general sequence of starting from price and deducting non-manufacturing costs and required profit to isolate manufacturing cost. However, there are potential ambiguities in the phrasing: 
- The mention of 'development costs over the initial estimated sales volume' suggests spreading upfront development costs across the initial volume, which is a common practice when calculating target costs, but it should be clear whether those development costs are treated as sunk or as part of the non-manufacturing costs to allocate per unit. 
- The inclusion of 'delivery costs' is acceptable as a non-manufacturing cost, but sometimes distribution or delivery is treated separately from manufacturing cost calculations depending on the target costing framework used by the organization.

Now, evaluating why this approach is consistent or inconsistent with standard target costing: 
- Consistent elements: starting from market price, subtracting non-manufacturing costs, and subtracting desired profit to arrive at target manufacturing cost per unit. This captures the essence of working backward from price to manufacturing cost. 
- Potential inconsistencies: if the wording implies errors in sequencing (e.g., subtracting development costs from price without properly allocating them as non-manufacturing or accounting for them as part of the cost structure you’re aiming to control). Also, the target manufacturing cost is typically the residual after accounting for all required non-manufacturing costs and profit, not simply 'subtracting development costs over the initial estimated sales volume' without clarifying cost categorization.

In summary, the principle behind the option is broadly aligned with standard target costing concepts: use the market price, deduct non-manufacturing costs, and deduct desired profit to determine the allowable manufacturing cost per unit. The exact correctness depends on precise definitions and categorization of development and delivery costs, as well as ensuring all non-manufacturing costs are properly allocated. If you had multiple choice options, the correct choice would ideally state: determine target selling price or market price, subtract desired profit and non-manufacturing costs (including development/RA allocations and delivery/distribution), to obtain target manufacturing cost per unit.

What are the key steps to determine the target manufacturing cost per unit for a new product?单项选择题

类似问题

Which of these departments are involved in establishing the target manufacturing cost?

What are the benefits of target costing and the value index? They both:

Question at position 16 The following costs are included in developing a target cost: (check all that apply)Manufacturing costsProduct marketing costsCost of returnsSupply chain transportation costs

Which equation better describes target costing?

Target costing is arrived at by taking the

The target cost approach assumes that

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单