ppt of target costing, kizen costing and abc....

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By. Amanpreet
Manpreet
Ekta
By.
Amanpreet
Manpreet
Ekta

2. Cost accounting
 Cost Accounting is a branch of accounting and has
been developed due to limitations of financial
accounting.
 Acc. to CIMA, “cost accounting is classification,
accumulation, assignment and control of costs.”
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3. Cost Control Techniques
 Cost Control; The process or
activity on controlling costs
associated with an activity, process,
or company.
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4. Target Costing
 The concept of target costing had its origin in Japan in
1960s as a result of difficult market conditions.
 Target costing can be defined as a cost management
tool for reducing the overall cost of the product over its
products life cycle.
 Target cost is the target price less target profit from the
product.
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5. According to Copper:
Target Costing is “a
disciplined process for
determining and realising a
total cost at which a proposed
product with specified
functionality must be
produced to generate the
desired profitability at its
anticipated selling price in
the future.”
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6. Objectives of target costing
 Downsizing the cost
 Making new products compatible to market needs
 Motivating the employees to attain target profit.
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7. Principals of target costing
 Price-led costing
 Focus on customers
 Focus on design
 Cross-functional product and process teams
 Value-chain involvement
 A life-cycle orientation
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8. Stages in Target Costing Process
Define the Product:
‘What you are selling and to whom?’ “What do they
want it to do?”
Set the Target:
“ What will they pay for it” and “What should I cost to
produce?”
Achieve the Target:
“How can we get there?” and “Are we getting there?”
Maintain competitive cost:
“How can we stay ahead?”
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Define the Product
Set the Target
Achieve the target
Maintain
competitive cost
Steps in Target
costing Process

10. Advantages of Target Costing
 Induces for innovations
 Reduces cost
 Increase spirit of team work
 Development of right products
 Enhances the probability of market success
 Alings the cost of futures with customer’s willingness
to pay for them
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11. Kaizen costing
 Kaizen costing is a cost reduction system.
 Yashihuro Monden defines kaizen costing as "the
maintenance of present cost levels for products
currently being manufactured via systematic efforts to
achieve the desired cost level."
 The word kaizen is a Japanese word meaning
continuous improvement.
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 ‘KAI’ means ‘Change or the action to correct’.
‘ZEN’ means ‘Good’.
that means “ change for the better”.
 Kaizen is small incremental changes made for
improving productivity and minimizing wastes.
 Kaizen costing is applied to products that are already
in production phase. Prior to kaizen costing, when
the products are under development phase, target
costing is applied.

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14. Features Of Kaizen
 Widely applicable.
 Highly effective and result oriented.
 A learning experience.
 Team based and cross-functional.
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15. Phases in Kaizen
A. Select an event.
B. Plan an event.
C. Implement an event.
D. Follow-up an event.
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16. Elements of Kaizen Costing
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17. Advantages of Kaizen Costing
 Kaizen reduces waste - like inventory waste, time
waste and workers motion.
 Kaizen improves space utilization and product quality.
 Results in higher employee moral and job satisfaction.
 Teaches workers how to solve everyday problems.
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18. Activity Based Costing
 The concepts of ABC were
developed in the manufacturing
sector of the United States during
the 1970s and 1980s.
 ABC often identifies areas of high
overhead costs per unit and so
directs attention to finding ways to
reduce the costs or to charge more
for costly products.
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Activity-based costing was first clearly defined in 1987
by Robert S. Kaplan and W. Bruns.
They initially focused on manufacturing industry
where: proportion of the direct costs = dec.
relative proportion of indirect costs= increased
Activity-based costing was later explained in 1999 by
Peter F. Drucker.
He states that traditional cost accounting focuses on
what it costs to do something, activity-based costing
also records the cost of not doing.

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Cooper and Kaplan described ABC as an approach to
solve the problems of traditional cost management
systems.

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 Activity-based costing records the costs that traditional
cost accounting does not do.
For eg.:
ABC

22. STEPS INVOLVED IN ABC
 Step 1: Identify Resources
 Step 2: Identify Activities
 Step 3: Identify Cost Objects
 Step 4: Determine Resource Drivers
 Step 5: Determine Cost Drivers
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Steps of ABC

24. ABC: Where to Use?
 High Overheads
 Product Diversity
 Customer Diversity
 Service Diversity
 Stiff Competition
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