limitations in its application. (8 marks)
参考答案
正确答案：
(c) Target costing should be viewed as an integral part of a strategic profit management system. The initial consideration in target
costing is the determination of an estimate of the selling price for a new product which will enable a firm to capture its required
share of the market. In this particular example, Superstores plc, which on the face of it looks a powerful commercial
organisation, wishes to apply a 35% mark-up on the purchase price of each cake from GWCC. Since Superstores plc has
already decided on a launch price of ￡20·25 then it follows that the maximum selling price that can be charged by GWCC
is (100/135) x ￡20·25 which is ￡15·00.
This is clearly a situation which lends itself to the application of target costing/pricing techniques as in essence GWCC can
see the extent to which they fall short of the required level of return with regard to a contract with Superstores plc which ends
after twelve months. Thus it is necessary to reduce the total costs by ￡556,029 to this figure in order to achieve the desired
level of profit, having regard to the rate of return required on new capital investment. The deduction of required profit from
the proposed selling price will produce a target price that must be met in order to ensure that the desired rate of return is
obtained. Thus the main theme that underpins target costing can be seen to be ‘what should a product cost in order to achieve
the desired level of return’.
Target costing will necessitate comparison of current estimated cost levels against the target level which must be achieved if
the desired levels of profitability, and hence return on investment, are to be achieved. Thus where a gap exists between the
current estimated cost levels and the target cost, it is essential that this gap be closed.
The Directors of GWCC plc should be aware of the fact that it is far easier to ‘design out’ cost during the pre-production phase
than to ‘control out’ cost during the production phase. Thus cost reduction at this stage of a product’s life cycle is of critical
significance to business success.
A number of techniques may be employed in order to help in the achievement and maintenance of the desired level of target
cost. Attention should be focussed upon the identification of value added and non-value added activities with the aim of the
elimination of the latter. The product should be developed in an atmosphere of ‘continuous improvement’. In this regard, total
quality techniques such as the use of Quality circles may be used in attempting to find ways of achieving reductions in product
cost.
Value engineering techniques can be used to evaluate necessary product features such as the quality of materials used. It is
essential that a collaborative approach is taken by the management of GWCC and that all interested parties such as suppliers
and customers are closely involved in order to engineer product enhancements at reduced cost.
The degree of success that will be achieved by GWCC via the application of target costing principles will be very much
dependent on the extent of ‘flexibility’ in variable costs. Also the accuracy of information gathered by GWCC will assume
critical importance because the use of inaccurate information will produce calculated ‘cost gaps’ which are meaningless and
render the application of target costing principles of little value.