Target Costing; Quality Function Deployment Bridal Photography Inc. (BPI) specializes in preparing wedding pictures, including a large book of photos for the wedding couple. Each couple works directly with a single BPI photographer, who helps the couple plan the photos to be made on the wedding day, select the wedding photo book, and choose the photos it is to contain. The standard fee for each wedding is $6,000, which includes all of the firm’s services, including the book of wedding photos. BPI is experiencing increased competition, especially based on price. BPI wants to protect its reputation and to continue to expand its business, and for this purpose, it has decided to use quality function deployment (QFD) to better understand the cost and value trade-offs in its business. As a first step, BPI defined the four key buying criteria that couples use in choosing and evaluating photographers: (1) fast service, (2) great photos at the wedding, (3) quality of the photo finishing (color, clarity, etc.), and (4) the quality of the photo book. A select sample of prior customers was asked to rate these criteria and, on a 300-point scale, they provided scores of 30, 120, 60, and 90, respectively. The BPI accounting records showed the average weekly cost of $5,000 could be traced to four activities: (1) a planning meeting in which the couple and the photographer determined what types of photos were desired, set dates for the photography and proofs, etc.; (2) photography on the wedding day; (3) preparation of proofs from which the couple would select the photos to be used in the book; and (4) preparation of the final photos and the wedding photo book. The average costs of the four activities were $800, $2,400, $600, and $1,200, respectively. As a final step, BPI managers, photographers, and staff worked together to determine an estimate of the contribution of each of the four activities to achieving the buying criteria. The results were as follows:
Required 1. Using the information provided, compute: a. The importance index for each component of the product, b. The cost index of each component, and c. The value index of each component 2. Indicate some business and competitive issues that should be taken into account when interpreting the values from requirement 1.