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How to calculate the target cost?
Target cost = total target cost * function coefficient

Target cost refers to an estimated cost set by the enterprise to ensure the realization of the profit target in a certain period of time as the goal of all employees in the comprehensive center. It is the product of the combination of cost forecasting and target management method.

The concept of "synthesis" is cited here to illustrate that the budget should be pursued by many departments and employees. In other words, the control of the cost level is the goal of the work. There are many forms of target cost, such as planned cost, standard cost or norm cost, which are generally more reasonable and scientific than actual cost.

Target cost management is an important part of enterprise target management. Carrying out target cost management can urge enterprises to strengthen cost accounting, make everyone care about costs and better implement the economic responsibility system, which is of great significance to motivate all employees to work hard and promote further cost reduction.

Extended data:

Problems existing in enterprise target cost

First, enterprise cost management focuses on superficial and administrative management, among some costs that are easy to be caught and "seen", such as the reduction of raw material prices in the manufacturing process, office expenses, business entertainment expenses and travel expenses in administrative management.

In the face of cost reduction that is not easy to be caught and seen, we rarely consider it, such as improving equipment utilization and improving labor production efficiency and quality. Moreover, it is easy to attribute the completion of cost indicators to objective factors (such as raw material prices), with little emphasis on subjectivity.

Second, cost management is most concerned about the leaders and financial personnel of enterprises. Cost control plays an important role in cost management, and employees only work to achieve the goal of cost control, lacking initiative, which is manifested in the formation of "top-down" cost management.

Third, cost management is "task-based, control-based", and all leaders and employees are striving to complete the target cost. The cost management of Japanese enterprises is "efficient and management-oriented". In addition to controlling manufacturing costs and various expenses,

Pay more attention to strengthening the training of enterprise employees, cultivate all-round and versatile enterprise employees, and improve people's labor efficiency. Although we have done some work, it is still not enough.

Fourth, the company eliminated equipment and idle new equipment coexist. On the one hand, I hope to reduce the cost by not mentioning or mentioning depreciation less in policy, which is not allowed by the operating rules of listed companies. From the investment concept, if there is investment, the value must be transferred to the carrier. From the product point of view, the operating cost has been settled.

With this kind of thinking, the present investment is the future cost. On the other hand, the service life of spare parts was not considered during overhaul, and the final manufacturing cost of products was not reduced, but the sustainable viability of enterprises was reduced.

Fifth, cost management objectives and budget objectives are not effectively combined. At present, the assessment of the company is artificially divided into two assessment subjects, and the basis for comparison is not the business objectives, but the average level of the previous year, which is backward and inappropriate. Comparing the practices of companies and western developed countries, we deeply feel that there is a big gap between companies and enterprises in cost management.

Baidu Encyclopedia-Target Cost