Product Costing – Tostitos Blue Corn Tortilla Chips -Sample Paper

Introduction

Companies use various methods to determine the price of their products. They ensure that the price of the product enables them to have cover the production costs and have a good profit margin. The profit margin should be comparable to other companies in the industry. However, companies may formulate strategies that enable them to earn a higher profit margin than other companies in the industry. The ability to have a higher profit margin gives a competitive edge over its rivals. Target costing is one of the methods that companies use to determine the price of products. target costing refers to setting the price of a product based on what the potential customers of the product are willing to pay. Companies that have a strong brand name may use target costing to set a high price on its products. This enables the company to earn a high profit margin than other companies in the industry (Swamidass, 2002). Apple is one of the companies that have a strong brand name. The company earns a higher profit margin than other companies in the industry, which improves its competitiveness.

Tostitos Blue Corn Tortilla Chips

Frito-Lay Inc., which is a wholly owned subsidiary of Pepsi, manufactures Tostitos Blue Corn Tortilla Chips. The company headquarters are in Plano Texas. Frito Lay generally engages in the manufacture of snacks. Tostitos Blue Corn Tortilla Chips are made of white corn. They also have an ‘authentic’ Mexican taste, which makes them popular. Tostitos Blue Corn Tortilla Chips have a diameter of approximately 3 cm. Tostitos Blue Corn Tortilla Chips are usually eaten with nacho cheese dip or salsa, which are also manufactured by Frito-Lay.

The price of a 9 ounce Tostitos Blue Corn Tortilla Chips is $5. Since Tostitos Blue Corn Tortilla Chips is sold by Frito-Lay, which is a subsidiary of Pepsi, it is vital to analyze the operating profit of the division of Pepsi Inc. The sales revenue of the division that manufactures and markets Pepsi Inc. is 14126 million. On the other hand, the operating profit of the division was 3877 million. This implies that the operating profit margin of the division is 27.45%. Therefore, the total cost of producing the product plus overheads is 72.55%. Target costing would help in determining the cost of manufacturing cost of the product. The target cost of the product is approximately 72.5% of the selling price. Since the selling price of Tostitos Blue Corn Tortilla Chips is $5 the target cost of the product is: 5 X 0.725 = 3.625. Below is a table that shows the breakdown in the manufacturing cost of the product.

Download full sample paper on Product Costing – Tostitos Blue Corn Tortilla Chips or Order original paper on product costing of a product of your choice at an affordable price by clicking the Order Button.


ORDER UNIQUE ANSWER NOW

Add a Comment