Formed in 1966, Jord Homes (Jord) quickly gained a reputation for the construction of high-quality, prefabricated timber-framed houses in its home country of Corvola. Under the leadership of the founder, Karl Larsson, this reputation continued to grow with Jord successfully completing over 30 houses by 1970 . The success continued and resulted in the need to build a factory in 1980, where the manufacturing facilities, showroom and head office are all still currently based.

Some shareholders have suggested it is time to grow the business in other directions.

You receive an email from the finance director:

Prepare a response to Carla's email.

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To: Finance Manager From: Carla Holm Date: Today Subject: Budget housing project Hi, As you know, we are looking at expanding into the budget housing market. Our aim will be to provide high quality prefabricated housing at a price affordable enough to become market leader in this market. This obviously comes with some significant changes to the way that we currently operate in the high end market. I'd like our project team to consider the use of target costing and value analysis to help determine the scope of what we may be able to build to fit with our project aim. Could you put some notes together covering the principles behind target costing, why it would be useful for this project and how we could apply it? Thanks, Carla