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PLM training · Part 6 / 8

Costing: from the BOM to the target margin

Audio narration · listen first

Product cost comes from the BOM, labor and extra processes, and is compared with the target cost. In PLM, costing is not a one-time calculation; it is a record kept up to date from pre-costing to order costing.

In this part

  • You list the components of unit cost: materials, labor, extra processes, logistics and overhead.
  • You explain how the target cost is worked out backward from the target retail price and the target margin.
  • You tell the difference between margin and markup.
  • You understand why the FOB and DDP delivery terms change the cost.
Costing: from the BOM to the target margin: Pimland PLM screen
Product costing screen: tabs for raw materials, trims, labor and other costs; the cost summary and the target and actual markup side by side, with cost revisions. A style that misses its target is visible before approval.

Terms in this part

Target cost
The upper limit a product's cost must not exceed, calculated backward from the target selling price and target margin.
Target margin
The target a brand aims for, expressed as the difference between selling price and cost divided by the selling price.
Markup
The ratio of the difference between selling price and cost to the cost; not to be confused with margin.
FOB
The delivery term under which the seller is responsible until the goods are loaded onto the ship at the port of loading, and the buyer takes over after that.
DDP
The delivery term under which the seller delivers the goods to the buyer's address with taxes and customs costs already paid.
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There are 3 questions at the end of the part; at least 2 correct answers open the next part. The questions open with your Academy account, after your Basic certificate.

· Pimland Academy team