Costing Essay Example | Topics and Well Written Essays - 750 words

Costing - Essay Example The Target costing method is widely used in the RD&E phase of the total life cycle of a good. The Target costing accounting method has been extensively used since time immemorial. This method dates back to the early 20th century at the height of industrial revolution in Europe and North America. Henry Ford, the famous engineer designed the first vehicle in 1908 in a factory with an aim of minimizing costs and maximizing profits through mass production. Ford managed to retail the T model vehicle at an average of $ 495 in the year 1913 (Wilson 2013). Understandably, for him to achieve that fete, the engineer and his planners had to minimize production costs to a bare minimum. Henry Ford accounted for raw material expenses through a backward integration process, labour expenses through specialization and division of labour and other expenses through frugal behaviour. Fords Company received a boost after the end of the Second World War (WWII) for the demand for the vehicles rose sharply (Wilson 2013). With increased demand, the price for the vehicle increased upwards. Because Target costing is normally applied to fresh merchandise planning, which mostly needs investments in new tools and equipment, it is justifiably correct to say that price influences both investments and expenses. The Total life cycle cost accounting method is a broad way for company executives to comprehend and account for costs through merchandises design, creation, and manufacturing, promotion, delivery, maintenance, service and clearance phases. It denotes a process of organizing all expenses along the value chain (Keuper 2011). By way of employing this method, cost managers are able to salvage some significant costs. By selected approximations, about 80% of goods total life expenses are committed by assessments made in the course of the RD& E phase, emphasizing the significance of managing all expenses along the value