Question

1. Define each of the following terms in your own words:

Target costing, value chain, and Just-in-Time inventory system.

2. Explain the relationship among these terms and the relevance to them of accounting.

Answer 1

MEANING -

TARGET COSTING- Target costing is a system which predetermine the cost of making product, price of product and how much it cost to make product quality effectively. In Easy language target costing means the planing of structure of cost of making product from beginning to the end when it is sell. It include each and every cost which occur during the making of product . It is the most important tool of accounting for the organisation.

VALUE CHAIN- A value chain is a set of activities that an organisation carries out to create value for its customers. A value chain add value to raw material from beginning of making product. All the activities are done to give customers value for their money and customer satisfaction. This helps organisations predetermine each cost from the raw material to end of finished goods.

JUST IN TIME INVENTORY SYSTEM- This is inventory management technique which keep eyes on the demand of product in the market and accordingly to the demand this system increase the efficiency of product and decrease the waste of product. So it is also very helpful for organisation.

2) The relationship between the terms are these all terms related to the cost of making product it's efficiency and customer value for the customer. The relevance of these three tools in accounting is these tools helps organisation to decide all the structure of product costing so it can decide the profit strategy and for the company efficiency and goodwill.