Pricing, target costing & customer profitability analysis

The following discussion agenda is on Pricing, Target Costing, and Customer Profitability Analysis in the subject of Strategic Management Accounting (SMA):

1. Major influences on pricing
• Customers
• Competitors
• Costs
2. Time horizon consideration in product-costing
• Short-run
• Long-run
3. Long-run prcing approaches
• Market-based
• Cost-based
4. Target pricing based on Target costing
• Cost incurrance and locked-in costs
• Cost-plus target rate of return on investment
5. Life-cycle product budgeting & costing
• Benefits of using life-cycle costing
• The full set of product revenues and costs is visible
• % of total costs incurred at early stage of a product life cycle is highlighted
• Interrelationship among various business function cost categories are highlighted. This promotes more effective value chain linkage analysis.
6. Customer-profitability analysis
• Customer revenue
• Customer costs
• Customer-profitability profile
• Customer value assessment

Study notes
Note 1

Note 2

Note 3

Note 4

Note 5

Note 6

References

• Bhimani, A., Horngren, C.T., Datar, S.M. and Rajan, M.V. (2012) "Chapter 12: Pricing, target costing, and customer profitability analysis" Management and Cost Accounting, Prentice Hall
• On value engineering: http://en.wikipedia.org/wiki/Value_engineering