The method I did was by making the cost per unit as “x” and considering lifetime cost per unit to be as 7 because as the question stated about the ‘maximum manufacturing cost per unit’ So like that I got cost per unit to be as 4.8

But after seeing the way u did, Mine seemed more time consuming then yours.

there is a mindless trick to it. ex- % of prof on cost % of prof on s/pr. 25% or 1/4 20% or 1/5

30% or 1/3 25% or 1/4

so what I have done here is. Step1 convert the ? of prof to a fraction.

Step2 add / substract 1 to the denominator.( depending on what you want to convert to. ex- to convert to % prof on sales add 1 , to convert to % prof on cost substract 1)

Step3 Convert the fraction to %

Step4 thats it. now apply this to the cost/sale price.

thank you for a great lecture, i feel very confident learning these topics with your help. Will the material become a lot more difficult in later chapters?

Dear Sir, regarding the example 1a, of life cycle costing,is calculate the target cost? the SAME/INTERCHANGEABLE with calculate the target cost per unit?.I am a little bit confused with your answer, it seems you calculated the target cost per unit ,NOT target cost. I calculated the target cost as: Selling price ($10.50 by 50000)units=$525000 Profit(525000 by 50/150)= $17500 Target cost= $35000

I would have calculated target cost per unit as: TARGET COST PER UNIT: $350000/50000units= $7pu

If you look at the question in the lecture notes, it says that there are 2,000 units in the first year and then 12,000 units in each of the next 4 years. 2,000 + (4 x 12,000) = 50,000 units in total.

lectures are short and very effective.. i can cover syllabus very fast…. I haven’t seen any local or international teacher’s lecture as good as these are,,, thank you sir…

A very good example incorporating target costing. Because of the cost gap of $0.80 (the difference between the target cost p.u.$7 and lifecycle cost p.u.$7.8) the product is not worth making.Thanks.

If the cost gap can be closed to meet the target cost then the product is worth making but not compromising customer perceived quality and satisfaction.

you will still get the same answer as 50/150*$10.50=$3.5 , which is the desired profit .Then following the formula of estimated selling price – desired profit ,

$10.50-$3.5= $7, which is the target cost .. Hope it will be helpful .

swaroop12 says

The method I did was by making the cost per unit as “x” and considering lifetime cost per unit to be as 7 because as the question stated about the ‘maximum manufacturing cost per unit’

So like that I got cost per unit to be as 4.8

But after seeing the way u did,

Mine seemed more time consuming then yours.

Thank you for such amazing videos sir ?

swaroop12 says

That was an emoji, not a question mark

John Moffat says

Thank you for your comment 馃檪

addisanopacourage says

Hi Sir on target costing. I missed where you got the $100 on the costs?

hsnkzmi says

there is a mindless trick to it.

ex-

% of prof on cost % of prof on s/pr.

25% or 1/4 20% or 1/5

30% or 1/3 25% or 1/4

so what I have done here is.

Step1 convert the ? of prof to a fraction.

Step2 add / substract 1 to the denominator.( depending on what you want to convert to. ex- to convert to % prof on sales add 1 , to convert to % prof on cost substract 1)

Step3 Convert the fraction to %

Step4 thats it. now apply this to the cost/sale price.

addisanopacourage says

Thanks

loukasierides says

Dear Sir,

thank you for a great lecture, i feel very confident learning these topics with your help. Will the material become a lot more difficult in later chapters?

John Moffat says

Thats impossible to answer – everyone finds different things difficult 馃檪

loukasierides says

i understand . thank you once again for these great lectures

John Moffat says

You are welcome

dumebi1234 says

how come the cost is $100 please how did you arrive at the answer

John Moffat says

But the cost is not $100 and so I don’t understand what you are asking.

I work through the question in the lecture, and of course there is a printed answer in the lecture notes.

Agatha says

Dear Sir,

regarding the example 1a, of life cycle costing,is calculate the target cost? the SAME/INTERCHANGEABLE with calculate the target cost per unit?.I am a little bit confused with your answer, it seems you calculated the target cost per unit ,NOT target cost.

I calculated the target cost as:

Selling price ($10.50 by 50000)units=$525000

Profit(525000 by 50/150)= $17500

Target cost= $35000

I would have calculated target cost per unit as:

TARGET COST PER UNIT: $350000/50000units= $7pu

Thanks for always been helpful.

Agatha says

NOTE: target cost $350000.

hoangdh09 says

where does Sir take 50000 units ? Thanks

John Moffat says

If you look at the question in the lecture notes, it says that there are 2,000 units in the first year and then 12,000 units in each of the next 4 years.

2,000 + (4 x 12,000) = 50,000 units in total.

thexmeraz says

lectures are short and very effective.. i can cover syllabus very fast…. I haven’t seen any local or international teacher’s lecture as good as these are,,, thank you sir…

John Moffat says

Thank you very much for your comment 馃檪

Samuel Koroma says

A very good example incorporating target costing. Because of the cost gap of $0.80 (the difference between the target cost p.u.$7 and lifecycle cost p.u.$7.8) the product is not worth making.Thanks.

Samuel Koroma says

If the cost gap can be closed to meet the target cost then the product is worth making but not compromising customer perceived quality and satisfaction.

John Moffat says

Correct 馃檪

Samuel Koroma says

Thanks John

John Moffat says

You are welcome 馃檪

ganeshkrupad says

Thank you for the free lecture. It was really helpful.

John Moffat says

You are welcome – I am pleased it was helpful 馃檪

shayan93 says

Sir in part c of the example, you multiplied 50000 units by 7, why did you not multiply it by 10.5 as our aim was to achieve the required mark up?

John Moffat says

Because if there is a mark-up of 50% on cost then the cost will have to be $7 since the selling price is $10.50.

Have you watched the lectures on the previous chapter (target costing)?

deborahidogun says

Pls why not 50/150 * $10.50. Why 100/150 *$10.50. I hve watched the previous lecture but im confused.

sounbal says

you will still get the same answer as 50/150*$10.50=$3.5 , which is the desired profit .Then following the formula of estimated selling price – desired profit ,

$10.50-$3.5= $7,

which is the target cost .. Hope it will be helpful .

profabed says

Thank you very much. Much appreciated .