Target costing

Target costing is a method of cost control in development processes. Target costing uses market research to define the characteristics of products slated for development and determine a hypothetical market-oriented sales price. If the projected profit is derived from this price, this results in target costs which specify the financial scope of the developmental process. Various methods are used to help split target costs, e.g. into single projects, assemblies, or components of a product.

Target costs may be set by offers from the sales department or by the market. Consequently, target costs for design and development are to be kept or even undershot. Likewise, it is essential not to deviate from the calculated costs for process planning and engineering.

In FACTON, target costs are set by assigning a target.

FACTON also offers the target traffic light as a tool for complying with the cost targets in constant focus.

Linear Target Costing Linear target costing is a process that helps users to automatically create new target costs. The target costs of a calculation objects are increased or decreased by a percentage surcharge. All subordinate calculation objects also change by the amount of this surcharge. A relative target delta (target delta input) and an absolute target delta (target delta calculated) are generated. After finishing the work, the absolute target costs are taken over to the target costs.

Example
  1. The user determines the production costs.
  2. Production costs are accepted in the targets of individual objects ("Apply target costs" function in FACTON Standard).
  3. The target delta (relative) is set at the top assembly group.
  4. The target costing result is evaluated in a Liststyle.
  5. If there are changes in subordinate assembly groups, steps 3 and 4 are repeated.
  6. The target delta (absolute) is accepted as a new target cost.
  7. The project is saved.

Define target costs

  1. Select a calculation object in the project structure.

  2. In the ribbon, click on Start ► Target Costs ("Edit" group) ► Define. The Define Target Costs dialog opens.

    Alternative: Open the dialog via the context menu in the project structure

  3. Enter a value in the "Target costs" entry field.

    If the quantity is > 1, you may also specify the target costs per unit.

  4. Confirm your entries with OK.