MAC3703 LU11-15
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1. Target Costing
Expected Selling Price - Required Profit
Formula
2. Cost Gap Current/estimated cost - target cost
3. Addressing How to reduce cost/identify where excess cost
cost gap? coming from? One way to do this may be to
mechanize the pro- duction process to reduce
wastage
4. Life Cycle
Cost- ing (LCC) accumulation of costs for activities that occur
over the en- tire life cycle of a product, from
inception to abandonment.
Life-cycle costing includes development cost,
design cost, manufacturing cost, marketing cost
and distribution cost. When recognising the
importance of life-cycle costing, one realises that
design cost should be managed, the time before
5. Product Life the product goes to market has to be reduced
Cy- cle (PLC) and the life-cycle of the product has to be
maximised
Check folder for own image.
4 Stages- introductory, growth, maturity and
6. Product Life Cy- decline stage
cle -
Introductory
Stage
Low demand to start. Require additional
7. price penetration
marketing expen- diture and a pricing strategy to
strategy
achieve sales volumes.
Can use Price Skimming Strategy or Price
8. price skimming Penetration Strategy
strategy
a pricing strategy that aims to attract customers
1/
, MAC3703 LU11-15
Study online at
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from
competitors by
offering a lower
price (this can
help to build
market share)
A technique that
sets very high
prices for a
limited period
before reducing
them to more
competitive
levels. In order to
maximize profit
for early adopters
2/
, MAC3703 LU11-15
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9. Product Life Sales volume starts to grow when product being
Cy- cle - Growth estab- lished in market.
Stage
Economies of scale are improving and the price
per prod- uct is reducing.
Even though competing products will be
introduced into the growing market, it is usually
the most profitable stage for the initial supplier
and prices will stabilise based on the demand
10.Product Life Demand for the product will slow done as it
Cy- cle - starts to mature in the market.
Maturity stage
Profits will start to decline unless innovative
ways can be found, so that buyers can continue
to differentiate the product from newer more
innovative alternatives or the sales price may
need to be reduced. Profits will be lower than
during the growth stage.
11.Product Life
Cy- cle - Sales curve begins to decline.
Decline Stage
Profit can still be made during the onset of the
decline stage, but companies may face having to
stop producing a product if sales volumes
continue to reduce.
12. Price elasticity of a measure of how much the quantity demanded of
a good
demand responds to a change in the price of that good
13. Price elasticity of % change in quantity demanded / % change in
price
demand formula
14.Profit maximisa- tion model
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