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Case 10-3 Target Costing Nebraska Toaster Company Aftab Usmani Alex Derevin Carla Daniels Shantanu Singh.

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Presentation on theme: "Case 10-3 Target Costing Nebraska Toaster Company Aftab Usmani Alex Derevin Carla Daniels Shantanu Singh."— Presentation transcript:

1 Case 10-3 Target Costing Nebraska Toaster Company Aftab Usmani Alex Derevin Carla Daniels Shantanu Singh

2 Case Details Wants to introduce new product : A Toaster Oven Wants to introduce new product : A Toaster Oven Want to match the price on basic toaster Want to match the price on basic toaster Market price : $20 Market price : $20 Wants to earn profit of 20% on sales price Wants to earn profit of 20% on sales price Customer requirements are identified Customer requirements are identified Toasts properly Toasts properly Size Size Speed of toasting Speed of toasting Toaster capacity Toaster capacity Appearance Appearance Easy to clean Easy to clean

3 Target Cost Target Cost =Sales Price - 0.2* Sales Price Target Cost = (1-0.2)* $20= $16

4 Value Chain Analysis Toaster Oven Life Cycle Target (In $) Current Gap R&D4.004.200.20 Manufacturing9.0012.003.00 Selling1.601.800.20 Shipping(outsourced)0.901.000.10 General Admin 0.500.700.20 Total16.0019.703.70

5 Functional Cost Analysis Component Current Cost (In $) % of Cost Heating Unit 2.4020 Display Light 1.6013 Level0.605 Spring Coil 0.605 Temperature Control Timer 0.605 Body Design 5.1043 Crumb & Grease Catcher 1.109 Total12.00100%

6 Requirement Analysis Customer Requirements CustomerRanking % of Score Toasts & Grill Property 528 Size317 Speed of toasting or grilling 317 Toaster Oven Capacity 211 Appearance15 Easy to Clean 422 Total18100

7 Functional Performance Analysis (Percentage) Heating Unit Display Light LeverSpringCoil Temp. Control & Timer Body Design Grease Catcher Total Toasts Properly 50%20%20%10%100% Size50%50%100% Speed of Toasting 70%10%20%100% Toaster Capacity 30%5%60%5%100% Appearance20%80%100% Easy to Clean 50%45%5%100%

8 Functional Performance Analysis (Importance Index) Heating Unit Display Light LeverSpringCoil Temp. Control & Timer Body Design Grease Catcher Toasts Properly 0.140.0560.0560.028 Size0.0850.085 Speed of Toasting 0.1190.0170.034 Toaster Capacity 0.0330.00550.0660.0055 Appearance0.010.04 Easy to Clean 0.110.0990.011 Importance Index 0.4870.010.06150.0560.0450.3240.0165

9 Rank of Product Function

10 Target Cost Index Function Heating Unit Display Light Lever Spring Coil Temp. Control & Timer Body Design Grease Catcher Importance Index (A) 0.4870.01 0.061 5 0.0560.0450.3240.0165 % of Target Cost (B) 0.20.130.050.050.050.430.09 Target Cost Index (A/B) 2.4350.0771.231.120.90.750.18

11 Functional Performance Analysis (Requirement Score) Heating Unit Display Light LeverSpringCoil Temp. Control & Timer Body Desig n Grease Catcher Total Score Toasts Properly 2.5110.55 Size1.51.53 Speed of Toasting 2.10.30.63 Toaster Capacity 0.60.11.20.12 Appearance0.20.81 Easy to Clean 21.80.24 Total Score 8.70.21.110.85.90.318 Total $ 2.41.60.60.60.65.11.10Score/$3.6250.1251.831.671.331.160.27

12 Rank of Product Function


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