Product Costing: Traditional Methods and Activity Based Over the past 26 years Dell, spearheaded by Michael Dell have believed in a one point agenda that is uniform quality products from all its manufacturing locations. They practice six- sigma as an effective statistical tool for delivering the best to their customers globally…
By doing this they maintain zero inventory of building parts or what is called as raw materials (RM). Dell enjoys a loyal customer trust globally. One of the reasons for this is that the base prices of their laptops and other products are practically the same across continents. Product pricing at Dell is a serious and well thought over process through strong market research and consumer inputs. Based on the marketing debrief the research and development (R&D) center starts developmental activities on the consumer centric product. The engineers work under the strict constrict of the product cost based on the marketing requirement. The first level of product cost brainstorming is between the marketing, sales and engineers at the R&D. All quality cost parameters namely prevention, appraisal and failure (both internal and external) are considered. In the six sigma jargon another cost is considered, cost of poor quality (Juran, 1988). Dell as an organization completely negates this hidden quality cost. The costing activity of consumer goods in my organization follows the above mentioned steps towards deciding pricing of a bathing soap. The main ingredients of a bathing bar are soap noodles, fragrance, permitted colors and fillers. The cost of a 100 g net weight of bathing bar is $1.5. ...
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