Cost Accounting
Toyota is basically company involved in the business of motor vehicle production and sales. It is Japan based company and operates from its homeland. Basically the articles talk about how Toyota is maintaining to lower its breakeven point for its continued operations in Japan. Many companies have gone overseas but Toyota remains in japan. Most of the automobile companies have shifted their operations compared to 28% for Nissan Motor Co. Ltd. and 27% for Honda Motor Co. Ltd mainly because to save freight cost and avoid other issues such as inflation which could harm its sales and profits directly. However Toyota takes pride in running and retaining production in japan.
One of the major problem being faced by the company is that dollar has slid from over 90 yen a year ago to 80 yen now thereby making all the exports highly expensive. This means for every yen of appreciation, Toyota would need to raise the price of its autos in the United States by 1.25% to maintain the same profit which is not a very feasible alternative for the company. Also Toyota builds 40% of vehicles in Japan therefore if more appreciation occurs it would greatly influence the sales and profits for the company, because of this Toyota expects profit to drop 31%, from $5 billion (408.1 billion yen) in 2010 to $3.5 billion (280 billion yen) in 2011. The break-even point for Toyota is around 85 yen to the dollar. “Were trying to be able to operate (profitably) at 85 yen (to the dollar) and 70 percent utilization,” Atsushi Niimi, Executive Vice President in charge of manufacturing, told reporters. However it is constantly trying to lower its breakeven point by coming up with possible solutions. Toyota has made its factory lines more flexible so that it can operate at the break even by daily production of 12000 units.
Furthermore they are also planning to reduce the capital spending by 40%. Also to lower their costs they are making their engine assembly process more compact,