Nissan Motor Company Ltd

Target Costing System

Team 3
MYRA School of Business

July 25, 2016

 Agenda

 About Nissan

 Target Costing System

 Strength and Weakness of Target Costing System

 Nissan’s Target Costing System

 Nissan’s Product Cost System

 Change Ahead & Recommendations

 Nissan – Innovation that excites

Japanese Multinational Automobile Manufacturer

Vision: To enrich People’s Life

Mission: To provide unique and innovative

automotive products and services that deliver
superior measurable values to all stakeholders

As a global automotive manufacture, Nissan is

particularly keen on a Zero-Emission society and has
been striving to develop the vehicles’ low
environmental impact
 Target Costing System

• Target costing can be defined as a cost management tool for

reducing the overall cost of the product over its products life
cycle

• It is a market driven Define the product

costing system in which
cost targets are set by
considering customer
requirements and
competitive offerings Set the target

A Target cost is the Achieve the target

maximum amount
of cost that can be
incurred on a product
Maintain
Competitive Cost
Strengths & Weakness of Target Costing
System
Nissan’s Target Costing System

Once the target cost of a new model is established, value engineering is used
to ensure that the new model on entering production is manufactured at the
desired target cost
Nissan’s Target Costing System

Introducing New Products

Allowable cost = Target selling price – Target profit margin

Nissan’s Target Costing System
 Nissan’s Target Costing System

The target costing

system in Nissan
Motor Company,
Ltd. is rather
complicated and
complex to be put
into one single
scheme. However,
the basic idea of
making such system
is still in the corridor
of target costing
theory.
Nissan’s Product Cost System
Nissan separated the system into 2 stages,
1.Market-driven costing, Product-level target costing, and
2.Component-level target costing.
 Nissan’s Product Cost System

Cost-reduction objective = Current cost – Allowable cost

Product-level target cost = Current cost – Target cost-reduction objective

Strategic cost-reduction challenge = Product level target cost – Allowable cost

Nissan uses the same system throughout all of its manufacturing unit, which
basically divides the cost into two subjects; DIRECT and INDIRECT expenses.
Three different product profitabilities were calculated as well, where the first
one was the direct material marginal profit, the product contribution, and last
operating profit.
Change Ahead & Recommendations
Hope You enjoyed the Journey

Questions ???