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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Target Costing
Hi
I want to ask you that what is Materials Requirement Planning (MRP) and does it links with Target Costing and cost reduction process??
MRP is principally about making sure you have enough raw materials and components to manufacture goods to meet your orders. So whan orders are received the materials and components needed are automatically calculated, inventory is taken into account and orders will be placed with suppliers.
Cost reductions might be achieved by greater efficiency, lower inventory and less wastage. Negotiating prices with suppliers is useful, but not a prime part of the MRP automated process.
Thanks a lot your answer really helped.