question

This query is : Resolved

Share Report Follow Query Ask a Query

brihaspati mani

brihaspati mani (Querist)
Follow

14 December 2010 meaning of transfer pricing

Arun Iyer

Arun Iyer (Expert)
Follow

14 December 2010 Dear Mani,

Target costing originated in Japan in the 1960s, where it is know as Genka Kikaku. It is such a costing system where the management consider it as a profit planning system.

Target costing is an activity which is aimed at reducing the life-cycle costs of new products, while ensuring quality& customer requirements, by examine all possible ideas for cost reduction at the product planning, research and development, and the prototyping phases of production.

Target costing is an important tool because it promotes cost consciousness and focuses on profit margin, both of which strengthen an organisation’s competitive position. It is not a technique that attempts to slash cost by trimming functions or closing departments; it is a steady and never-ending process to make sure that costs are always kept within to a minimum.

The target costing approach is a vital costing tool because research has shown that up to 90 per cent of costs are ‘built in’ at the product’s design stage. For example, the design stage sets the following.

• The design specification of the product including extra features.

• The number of components is incorporated in the product.

• Design of components . These should be designed for reliability in use and ease of manufacture. Wherever possible standard parts should be used because they are proven to be reliable and will help reduce stock handling costs.

• Type of packaging required. This includes product packaging and packing per case and per pallet. The aim is to protect the product and to minimise handling costs by not breaking pallets or cases during distribution.

• The number of spare parts that need to be carried. This ties in with the number of components used. Parts must sometimes be held for up to 15 years or so. They may be made while the product is still in production and stored for years, which is costly. The alternative is to disrupt current production to make a small batch of a past component, which is very costly.

Thanks

Ajay Mishra

Ajay Mishra (Expert)
Follow

14 December 2010 Hi

Transfer pricing means price at which transfer is being made.

Regards

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

Somnath Maiti

Shantaveeresh Manur

S D Kannan

adarsh chaturvedi

Dinesh kumar

Subscribe Now

question

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA