Not all costs should be treated the same. Target costing can be split into 2 groups:

Group One: Strategic Costs:

Group Two: Non-Strategic Costs:

Focus intensely on these costs!

A Target Cost slashing exercise with these costs can be productive without damaging the business.
Therefore, these are the ones to intensively focus upon first.

It is necessary to apply the 80/20 rule quite heavily in this section of the discussion.
Not sure about the 80/20 Rule?
Go to the Skills Module introduction: SM2.0 80/20 Sales Growth; Double Sales, Triple Profits

The 80/20 Rule states that a minority of causes, inputs or effort lead to a majority of the results, outputs or rewards.
Taken literally, this means that 80 percent of what you achieve comes from 20 percent of the time spent.

For more specific information on carrying out these analyses enrol in the Skills Module (3 x complimentary with this Campaign):
Go to the article: SM2.6 80/20 Business Analysis 
Contact us to open your enrolment

For more advanced methods, using spreadsheets, go to the article: SM2.5 How to do an 80/20 Data Analysis

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