Target Costing

8218 Words33 Pages
I Table of Content

1 Introduction 1
1.1 Definition of Target Costing 1
1.2 Historical Background 2
1.3 Objectives of Target Costing 3
2 Target Costing Principles 4
2.1 Price Led Costing 4
2.2 Customer Focus 4
2.3 Design Focus 5
2.4 Cross-Functional Involvement 5
2.5 Life Cycle Cost 5
3 Distinguishing Target Costing from Traditional Cost Management 6
4 Setting up a Target Costing Management 8
4.1 Fundamental Work 8
4.2 Systems of Managing Target Costing 8
4.3 Principles of Target Costing 9
4.4 Procedures of Target Costing 9
4.5 Risk of Target Costing 11
5 Three Forms of Target Costing 13
5.1 Price-based Target Costing 13
5.2 Value-based Target Costing 14
5.3 Activity-based Target Costing 14
5.4 Alternative Target
…show more content…
2 Historical Background

Target costing originated from Japan in 1960s though; it was not really the first approach to product costs determination. The first idea to determine product costs can be found as early as beginning of the last century at ford in the United States, and development of Volkswagen Battles in Germany in the 1930s.with a fixed product price in order to be affordable for all people (Arnaout, 2001).
However, the main idea of target costing concept emerged after the Second World War in the period of scare resources. At this time, the Americans introduced the concept of maximizing desirable product attributes while at the same time minimizing product costs (Leahy, 1998) This technique was known as value engineering and it was adopted by the Japanese and transformed into a dynamic cost reduction and profit planning system in order to work against the strong competition in Japan (Buggert and Wielputz, 1995).
Toyota was the first to implement value engineering in 1963 and it was known as “genka kikaku” in

More about Target Costing

Get Access