Describe value engineering in accounting in simple terms
docx
keyboard_arrow_up
School
Grand Canyon University *
*We aren’t endorsed by this school
Course
390
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
docx
Pages
4
Uploaded by TatumGianna
Describe value engineering in accounting in
simple terms. How would value engineering be
applied at the company five below
Value engineering is an approach to reducing expenses by using cheaper components and
minimizing production costs. Its objectives are to improve the value of goods, services, or
processes by evaluating their operations and reducing expenses without sacrificing the quality. I
previously worked for the company five below, and this tool could be utilized there. By examining
expenses for each item, like smartphone accessories, the company can find ways to reduce costs
without compromising quality. This may involve using different materials or negotiating better
deals with suppliers.
Bragg, S. (2023, July 26).
Value engineering definition
. AccountingTools.
https://www.accountingtools.com/articles/value-engineering#:~:text=Value
%20engineering%20is%20a%20structured
What are five steps for developing target costs and pricing? Apply these steps below of target
costing
to a specific product of a well-known company. Use beats headphones
1.
Develop a product
2.
Determine target price
3.
Derive a target cost per unit
4.
Cost analysis
5.
Perform value engineering to achieve target cost
Beats headphones are currently one of the most popular products in the current market. It is
important for Beats to establish a target price, as the company positions its headphones as
premium. To determine the target cost per unit, the desired profit margin is subtracted from the
target price. For example, if the target price is $200 with a 20% profit margin, the target cost per
unit would be $160. Beats then conducts a cost analysis to evaluate expenses associated with
materials, manufacturing, marketing, and distribution. This analysis helps in identifying areas
where cost efficiency can be improved without sacrificing quality. The next step is value
engineering, which involves finding a balance between cost savings and maintaining the qualities
that contribute tom Beats headphones recognized worth.
Bragg, S. (2022, January 15).
Target costing definition
. AccountingTools.
https://www.accountingtools.com/articles/target-costing
You have a great example. While value engineering could bring advantages to Dutch Bros, there
could also be limitations. How do you think customers would react to changes, such as
substituting materials or removing less popular flavors? Do you think there are any predictable
challenges or concerns during or after the implementation of these strategies?
Value Engineering is essentially when a company wants to cut costs without effecting
efficiency, so they look for cheaper alternatives that won't affect the overall functionality of
the product or service that they provide. A seafood restaurant I worked at replaced
the
halibut with cod, both fish taste essentially the same, but cod is cheaper. Therefore, they
lowered prices without lowering the quality of their product.
Wouldn’t the switch of fish be changing the product and the quality, since it is a completely
different fish?
Rephrase the question to fit the text above
Your example makes a valid point, but I have a different perspective.
With the seafood
restaurant's choice to substitute halibut with cod, despite their similar taste, could the switch raise
concerns about changes in the product and its quality, considering cod is a different fish
altogether?
Apple developed the iPhone in response to consumer demand, providing individuals with a
gadget that operates similarly to a portable computer. Upon determining the desired profit
margin for each of these products, they deducted this amount from the pricing to get the
estimated cost of the phone. Subsequently, the phone was meticulously engineered to
achieve maximum affordability while maintaining exceptional quality. Subsequently, Apple
has established itself as the dominant force in the mobile phone industry and has
successfully increased its operational income target due to its trust in its consumers'
inclination to pay a premium price.
Explain how the text above provides is a great example of the five steps for developing target
costs and pricing? Keep it simple
You’ve provided a great and clear example of how Apple applied these steps to their
organization. By adopting this strategy, Apple was able to produce a product that was both high-
quality and affordable, making it competitive in the market. This approach not only met the
needs of customers but also established Apple as a significant player in the mobile phone
industry, highlighting the significance of associating this product improvement with consumer
demand while keeping costs under control.
Value engineering is a systemic method of improving the value of a product or service using
less expensive methods or materials while maintaining the functionality of the product. Value
can be added to a product or service by reducing the cost to produce it or by improving its
function.
I worked in banking for many years and experienced the gradual improvement of functionality
and convenience for performing banking transactions. Value engineering has been used by
banks to improve their electronic banking experience and reduce the need to interact with a
bank teller. When first introduced, a customer could use online banking to view their account
activity and make transfers between their internal accounts. Now customers can use online
banking or mobile banking to do additional transactions such as making mobile deposits or
transfers to external accounts. These transactions used to require a physical trip to the bank
and now they can be performed electronically.
Great example on how this improves service quality to customers. How do you think the use of
this technology benefitted banks and has
helped banks save money in the way they
provide services?
Value engineering is determining what cost that are added into a product that would have
consumers value the product more, or if that cost was removed would make the customers
put less value on a product. It is also determining what costs of the products that doesn't
effect how customers perceive the value of the product. Apple would be a company that
would use value engineering especially with the camera part of the phone which at the time
was one of Iphone's big selling point. If apple were to decide to use cheaper lens but it
reduced the camera quality customers would see the Iphone as less valuable.
Ask a question the text doesn’t address regarding apple
Your example of apple is great. It is known that as iPhones get older, the quality of their cameras
tend to decrease. Therefore, how does the decreasing camera quality of Apple phones over time
affect Apple's value engineering principles?
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
The 5 steps of developing target costs and pricing consist of market analysis, cost estimation,
set target profit margin, value engineering, and price adjustment. Taking a well-known
company for example Toyota, they have to analyze the data and understand what pricing
range they can use for their cars. Then they have to estimate the costs of the cars taking into
account the different prices that are mainly composed of materials and labor. Then they have
to set the profit margin where they have to set the targeted price for them to earn revenue
while still keeping the price low enough to where it meets the value that the customer views
the car. After they have to optimize their process and make their production sufficient. Lastly,
they have to continue monitoring how many people are purchasing the cars and if they need
to drive the price down a little to sell more cars.
Add additional information that the text doesn’t address.
Companies like Toyota also have to consider global economic conditions and geopolitical events,
in addition to the current market conditions, since they might impact the cost and demand of
their cars.