Target costing

The implementation of a cost control system in construction companies contributes to reducing resource losses in the production process and increasing business productivity and profitability, especially when it comes to small business, which normally do not have a planning system and efficient control. Therefore, this article aims to propose a target costing model for a small construction business, concerning the efficient evaluation of its costs for the maximization of profits in proposals to provide services to public entities. A case study is used, in which data collection occurred through a questionnaire, observations of the process of preparing financial proposals, other unstructured questions, and documentary search, whose approach includes descriptive and qualitative research. The survey results revealed that the enterprise has a cost control system, but is technologically backward. Besides, the enterprise already intuitively used the concepts of target cost in preparing budgets. After evaluating the costs, a target costing model was suggested for the enterprise to use as a parameter in the bidding processes, however, it was not implemented due to the current unfavorable conditions.

TARGET COSTING SUITABILITY FOR IMPROVEMENTS OF LEAN SUPPLY CHAINS

Competitive advantage can be seen as the superiority of some market participants to properly use resources and utilize key competencies to deliver greater value than competitors, without compromising product quality and functionality. In that sense, accounting, especially management accounting, successfully responds to managers’ needs for information that will be their adequate support in strategy implementation. Lean concept and target costing are just some of the concepts whose strategic orientation can be a good support to managers. The aim of this paper is to point out the similarities and differences between lean concept and target costing and to show on a practical example how these concepts bring business improvements in supply chain.

Methodology for a Process Approach to Cost Management at Manufacturing Enterprises

Aim. The author aims to develop an original methodology for a process approach to cost management at manufacturing enterprises. Its core idea is the possibility of increasing overall enterprise efficiency and reducing costs by using internal reserves identified as a result of business process optimization.Tasks. According to the author, a process approach to cost management is future-oriented and has not yet been properly developed — hence the goals of developing and improving the theoretical and methodological foundations of its implementation.Methods. The methodology for a process approach to cost management is based on the most effective (from the author’s perspective) elements of such methods as “ABC-costing”, “Value chain concept”, “Cost-drivers”, “Target-costing”, “Kaizen-costing” with the author’s additions.Results. The author’s methodology for a process approach to cost management with regard to manufacturing enterprises is presented in the form of a structural and logical scheme. Its elements allow the reader to understand which methods, means, principles, and techniques can be used for its introduction and implementation. The fundamental basis of the methodology for a process approach to cost management is the author’s vision and definitions of the “object” and “subject” of cost management. The conventional structure of the representation of elements in the methodology is supplemented by the following units: “The form of implementation and organization of a process approach to cost management” and “Periods”.Conclusions. A process approach to cost management combines several of the most effective methods of cost management and accounting, making it possible to bring the level of expenses of an enterprise down to a competitive level using the internal reserves of the enterprise.

Analisis Penerapan Target Costing dalam Upaya Pengendalian Biaya Produksi pada CV Multi Bangunan

Perusahaan mengalami kesulitan dalam memaksimalkan laba. Salah satu penyebab perusahaan sulit berkembang yaitu masih menggunakan metode tradisional dalam kegiatan operasionalnya. Tujuan penelitian ini adalah untuk mengetahui penerapan target costing yang diterapkan pada CV Multi Bangunan dalam pengendalian biaya produksi. Jenis penelitian adalah deskriptif kualitatif. Data yang diperoleh dalam penelitian ini berdasarkan data primer yang berupa wawancara dan observasi serta data sekunder yang berupa dokumentasi. Hasil penelitian menunjukkan bahwa metode target costing merupakan metode yang baik dalam pengendalian biaya. Metode target costing dapat membantu manajemen untuk mendesain ulang produk dengan mempertimbangkan biaya, kualitas produk, dan laba yang akan dicapai. Metode target costing merupakan alternatif yang baik untuk menekan biaya. Hal ini dapat diketahui dari biaya produksi sebelum diterapkannya target costing berkisar dari Rp 344.772.000 sampai Rp 754.115.066 dalam satu tahun. Penggunaan metode target costing berdampak positif dalam pencapaian laba. Pencapaian laba sebelum diterapkannya target costing berkisar antara Rp 15.000 sampai Rp 19.000 per m2, sedangkan pencapaian laba setelah diterapkannya target costing berkisar antara Rp 17.000 sampai Rp 27.000 per m2. Ini berrati bahwa metode target costing terbukti berdampak positif dalam pencapaian laba perusahaan.

Accounting for preference dependency in target costing – a note

Target costing is a well-established strategic cost management tool in theory and practice. The original target costing model implies independence of customer preferences resulting in additive utility functions for the customer-oriented optimization of cost structures. We argue that this independence of preferences is not given until a minimum variant of a product is reached that provides its inherent functionality. This is reasonable since one cannot assign customer utility to a product that does not function in its most basic way. Our modified model accounts for the dependency of customer preferences and differentiates between the costs necessary to produce a minimum variant and those related to product features beyond this minimum variant. The customer-oriented optimization of the cost structure is then conducted only for those costs that exceed the costs of the minimum variant. This modification justifies the preference independence assumption in target costing and allows for a more reasonable assignment of required adjustments in costs per product component.

Pricing Strategies Evaluation in Radio Industry’s Firm (Case Study at PT XYZ)

The purpose of this study is to classify costs that an be included in the calculation of production using target costing precisely and determine the pricing strategy and the price that should be set by PT XYZ. The method used is qualitative research. This study concludes that the use of pricing strategies implemented by PT XYZ is inefficient, because in determining product prices, PT XYZ didn’t use target costing calculations, so the company doesn’t know how much costs must be spent to produce or run their services. By using target costing and target pricing, the company can make cost adjustments in order to remain competitive in the market. Furthermore, in determining the price, the company must decipher costs are incurred to run a service. The use of the most appropriate pricing strategy in determining new advertising prices in the industry is to use cost-based pricing. But if the company has already prices set, then it’s best for company to use customer’s value based pricing.

Application of Target Costing and Performance Analysis: Evidence from Indian Automobile Industry

The manufacturing companies must keep attention over challenges and for the moment of adopting technology and practices instead of observation of competition amongst competitor companies. To create automobile business successful in India, companies are essential to adopting better cost accounting techniques to minimize costs. Target Costing has been identified as a popular technique to accomplish company’s goals. Target costing consist exclusive approach to decide target price for the product and services. Target Costing ensure that new product price would be competitive in the market with substantial quality of products. This research investigates the application procedure of Target Costing (TC) in Automobile companies in India. This study employed Target Costing as a dependent variable and Profitability; Growth; Net Tangibility Assets (NTA); EPS and Firm Size as independent variables. The study adopted convenience sample of top ten automobile companies listed on BSE of India and panel data has covered from 2014-15 to 2018-19 financial years. The results determine the target costing impact on profitability had reported by Pearson’s correlation result shown a negative relationship. Target costing impact on Return on sales examined by simple regression analysis and revealed that there is positive correlation. Finally, Target costing impact on financial performance examined by multiple regression results revealed that there is positive correlation with Revenue from Operation; Profitability; Return on Sales (ROS) and Growth, while negative correlation revealed by Margin from Operation; ROA; Net Tangibility Assets(NTA); EPS and Firm Size.