Report on Target Costing Technique

Case Study Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Balanced Scorecard as a measure of performance tool......................................................1
2. Creation of balanced scorecard and suggesting two measures...........................................5
3. Recommendation for appointing another accountant.........................................................6
4. Utilisation of target costing................................................................................................7
5. Providing review of firm's share scheme...........................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Profit is the main purpose for which businesses are established. The enclosed report deals
with ITS UK LTD which is successful firm providing technology solutions to government and
clients. The report deals with issue of company as net profit is 6 % and 20 % of gross profit is
not enough for achieving desired profit. For overcoming this, target costing technique is
discussed in the report. Moreover, balanced scorecard which is an effective performance tool is
also explained and it is created for the company. Along with it, recommendation for accountant
is discussed and employee stock ownership scheme is explained as well. The implementation of
techniques will help company to reduce upon expenditures and will eventually increase profit.
1. Balanced Scorecard as a measure of performance tool
Balanced scorecard is an effective tool to measure a company's performance so that it
may be able to achieve strategic goals with much ease. This performance measurement tool was
developed by Kaplan and Norton in 1990 which has immense importance for company. In this
case study, ITS (Integrated Technology Services) Ltd which is UK based subsidiary of ITSI
(Integrated Technology Services International) is concerned about its low net profit margin.
Company needs to reduce upon its indirect expenditures so that it may achieve more than 6 %
net profit margin with much ease. For overcoming this problem, balanced scorecard can be
effectively used to garner desired profit margin (Harlez and Malagueno, 2016). This technique
consists of four perspectives such as financial, customer, internal business and innovation and
learning perspectives. These components are evaluated in following paragraphs-
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Finance perspective
ITS UK Ltd is required to follow upon its strategic mission and vision and as such,
balanced scorecard tool can be used to garner effective results. Starting from finance perspective,
various elements need to be evaluated by company. These include ROI (Return on Investment),
ROE (Return on Capital Employed), cash inflows and outflows. ITS UK Ltd which is engaged in
providing technology services to clients and government is required to maintain these elements
in quite effectual way (Maas, Schaltegger and Crutzen, 2016). Moreover, since it provides
technology solutions on contract basis, profit earned from particular contract also need to be
analysed so that financial performance may be strengthened in the best possible way.
Furthermore, company need to look after various financial records and all the above discussed
elements so that it may be able to maximise profitability and net profit margin. This will help to
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Illustration 1: Balanced scorecard perspectives Source: bi-
insider.com