A finished ACC-653 Topic 2 target cost gap analysis example, deriving allowable cost from a market price, closing most of the gap through value engineering and assigning the remainder to a supplier. Searches like "acc 653 topic 2 assignment example", "acc653 topic 2 sample" and "acc-653 topic 2 example" land here.
What a finished ACC-653 Topic 2 target cost gap analysis looks like
The finished analysis starts at the market price and works backward to what each kit may cost. Competitor kits in the same class sell at about $160, the company requires a 20 percent margin on price, and so each kit is allowed to cost $128. All figures are illustrative. The current engineering estimate is $146, leaving $18 to find. Value engineering then works the bill of materials component by component: a redesigned battery pack saves $6, consolidating the housing from fourteen parts to nine saves $4, a revised motor specification saves $3 and smaller packaging saves $2 in freight and materials. That closes $15. The remaining $3 becomes a component target handed to the motor supplier, and the analysis shows the price the kit would need if cost were allowed to set it: $182.50.
How an ACC-653 Topic 2 example is structured
Seven parts work from the market toward the factory. The market price and its evidence come first, a competitor pricing survey, so the starting figure is not the company's own wish. Next is the target margin, and why the company insists on it. The third part computes the permitted cost beside the current estimate and names the gap in dollars. Value engineering follows in a component table, each saving paired with its design change and a note on whether the features customers pay for survive. A fifth part assigns the unclosed $3 as a supplier target and explains why the motor was chosen to carry it. The sixth part runs the arithmetic forward, cost plus margin, to show the $182.50 price the market would refuse. A closing decision states the condition for approving launch: the supplier accepts the target by a named design review.
Price taken from the market
The $160 comes from a survey of competing kits, so the analysis begins with a figure the company does not control, which is the premise target costing rests on.
Allowable cost derived, not estimated
Subtracting the required 20 percent margin from the price yields $128, the cost the kit is permitted to have before any engineer estimates what it will cost.
The gap broken into components
Each part of the $18 shortfall is assigned to a component and a design change, so the reader sees exactly which choices close how much of the gap.
Features protected while cost falls
Every value engineering change carries a note on whether it touches torque, runtime or weight, since a saving that strips out what customers pay for defeats the purpose.
The remainder handed to a supplier
The unclosed $3 becomes the motor supplier's target selling price, the chained target costing Cooper and Slagmulder described, in which a component target crosses the company boundary.
Forward pricing shown and refused
Adding the margin to the $146 estimate gives $182.50, and the analysis sets that figure beside the survey to show why cost-plus pricing would lose the sale.
Where marks go in ACC-653 Topic 2
Running the arithmetic forwards, from the engineering estimate to a price, inverts the method, and many sections treat it as a conceptual error. Papers that reach the $128 correctly and then halt at the $18 shortfall have found the problem without working it, which is where the assignment's weight lies. Value engineering savings listed without the design change behind each one read as wishes, and a reader cannot tell which are real. Cutting cost by removing a feature customers pay for closes the gap on paper and forfeits the market price that started the calculation. A market price asserted with no evidence behind it lets the whole analysis rest on an assumption. Leaving a residual gap unassigned, or approving launch anyway without a stated condition, abandons the discipline at exactly the point where holding it costs something.
Get an ACC-653 Topic 2 example written to your instructions
Send your ACC-653 Topic 2 instructions, the rubric and the product, price or cost data your section assigned. A custom example is written to them, with the allowable cost derived from the market price, the gap located, value engineering savings tied to design changes and any remainder assigned, returned in 24 to 48 hours. Your first one is free.
ACC-653 Topic 2 questions, answered
What if the gap cannot be closed?
Then the discipline says the product should not launch in its current form. The analysis can recommend redesign, a different feature set aimed at a different price point, or abandoning the concept. What target costing does not permit is launching at the higher cost and hoping volume or later savings will rescue the margin. Many cases are built so that part of the gap resists closing, which tests whether the writer holds that line.
Where does the target margin come from?
From the company's required return, usually expressed as a percentage of price that reflects its long-term profit plan and the capital the product will tie up. In coursework the case normally supplies it. The example states the margin and its basis in a sentence, since a margin chosen to make the gap disappear would defeat the exercise before it started.
How is this different from the pricing work in earlier managerial courses?
Earlier courses usually take cost as given and ask what price or decision follows from it. Target costing reverses the direction: price is set by the market, and cost is the variable to be managed, mostly at the design stage when it can still change. The arithmetic is simple subtraction. The substance is refusing to let the current estimate set the price.