PEV Section 2

Sarahhawk

Hi
Can anyone tell me what correct answer for the last question of yesterdays paper would have been?

What is meant by value analysis and target costing?

David0097

Value analysis is all about reducing the costs of production without lowering the quality of the product for the end user. All about sourcing new materials, more efficient workers etc. Cheaper production for the same quality end product.

Target costing is where the cost of your product is pretty much determined by market forces (eg competition prices, market demand etc). You need to work out the profit margin you need to make on your product and therefore have the amount you can spend on production to meet this profit margin. Eg - Product sp is £100, your margin is 30%, you have £70 to spend on production to meet the required margin.

Hope this helps!

Sarahhawk

Thank you David,

I di dwrite something along those lines. Just hope for the best