Exam 8: Measuring and Managing Life-Cycle Costs

Dennis' TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Dennis' sales are currently 100,000 televisions per year. -What is the target cost per unit if the company wants to maintain its same profit margin in total dollars before the change and Marketing is correct?

How does the total-life-cycle costing approach differ from traditional product costing? Explain.

What does the breakeven time (BET)metric for the product development process measure?

Breakeven time:

________ starts with the estimated product costs and next determines the estimated selling price.

To be profitable,a company must generate revenues to cover costs incurred throughout the entire value chain.

Guiding the target costing process is a cross-functional team made up of individuals from within and from outside the organization.

Traditional costing begins with:

By some estimates,80% to 85% of a product's total life costs are committed by decisions made during the ________ cycle.

For most products,the majority of the product's total life costs are incurred during the:

Concerns about target costing include all EXCEPT that:

Xenon Company incurred $1,000,000 in research and development costs over an 18 month period to develop product X1.Sales of product X1 begin at the end of the 18 month period.Sales price of product X1 is $20 per unit; variable costs are $8 per unit; fixed costs are $140,000 per month.Sales volume is projected to be 20,000 units per month.Calculate the breakeven time for product X1.

________ starts with the estimated product costs and next adds the expected profit margin.

How do traditional costing and target costing differ in determining the selling price of a product?

In traditional costing,the company attempts to achieve a particular cost target.

Dennis' TV currently sells small televisions for $180. It has costs of $140. A competitor is bringing a new small television to market that will sell for $150. Management believes it must lower the price to $150 to compete in the market for small televisions. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Dennis' sales are currently 100,000 televisions per year. -What is the new target cost per unit if profit margin is 25% of sales?

Suppliers play a key role in the success of target costing.

Target costing was pioneered:

Deciding how to allocate organizational resources over a product's life cycle is primarily determined during the manufacturing stage.

In target costing,what are at least two techniques used to achieve target costing goals?