Target Costing: Nissan vs. Olympus

1340 WordsMay 27, 20086 Pages
Target Costing: Nissan v. Olympus Overview: Nissan Motor Company was the world’s 4th largest automobile manufacturer in 1990. They had 10% of the market for cars and trucks, with roughly 2 million passenger cars being produced each year. To increase its market share, Nissan implemented a plan to achieve domestic sales of 1.5 million cars by 1992. It also sought to obtain the number one rating in customer satisfaction. The company tried to develop a plan to produce a line of automobiles that matched consumer lifestyles. Nissan had a three stage process of introducing new models, the conceptual design stage, the product development stage, and the production stage, which typically took 10 years to complete. Olympus Optical Company was…show more content…
If engineers can find a way to improve the functionality of a product, they must also find a way to reduce related costs. Nissan then determined the estimated sales for each vehicle as well as projected revenues. When the target profit level was determined, Nissan would compare estimated actual costs to the allowable costs. If the actual costs were greater than the allowable costs, Nissan employed a system of value engineering to rework the products to make cost goals more attainable. After the first value engineering phase, management conducted reviews of each model. If the financial and performance analyses were accepted, the new model was authorized and went to the product development stage. Olympus developed a plan to reduce production costs. It would design products that could be manufactured at a low cost, reduce unnecessary expenditures, improve production engineering, adopt innovative manufacturing processes and shift a large portion of production overseas. The camera manufacturing process became highly automated and production engineering produced smaller, more manageable batches. Reducing unnecessary expenditures was the biggest program in the cost reduction plan. The company analyzed fixed costs, it analyzed costs associated with launching new products, it lowered the cost of purchased parts, and it

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