Unit -ll (Advanced management accounting)
Techniques of cost reduction : 1. Just in time ( JIT system) : The main aim of JIT is to produce the required items, at the required quality & quantity at the precise time they are required. JIT purchasing requires for the items where too much carrying cost associated with holding high inventory levels, purchasing system reduces the investments in inventories because of frequent order of small quantities. 2. Target costing : Target costing refers to the design of the product & it processes used to produce it. So, that ultimately the product can be manufactured at a cost that will enable the firm to make profit when the product is sold at an estimated market- driven price. The estimated price is called target price. 3. Activity based management : ABM is a method of identifying & evaluating activities that a business performs using activity based costing to carry out a value chain analysis / a re-engeneering initiate to improve strategic & operational decisio