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i cannot understand as to how target product cost will play a role in cost reduction…??????? ( target product cost is calculated by adding total cost of all production
functions ) when in each year actual production costs at the year end will form cost base for the next year and compared with kaizen goals…. here tightening of kaizen goals are emphasized in each year…No, target cost is obtained by setting a selling price (usually with reference to competitive prices) then removing the desired margin to get to the target cost.
Having said that, I don’t think that target costing then plays any specific role in Kaizen costing. Even without target costing you could still strive for improvements in each year’s cost compared to the previous year’s.
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