Research on target costing: past, present and future
- Published: 16 April 2018
- Volume 68 , pages 321–354, ( 2018 )
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- Heinz Ahn 1 ,
- Marcel Clermont ORCID: orcid.org/0000-0003-0383-4935 1 &
- Stephan Schwetschke 2
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Although target costing is an extensively studied topic in the management accounting literature, a holistic investigation into its methodological development is missing. Therefore, an extensive state-of-the-art analysis is conducted that focuses on articles in highly rated journals. We determine nine distinct research streams that encompass further developments of the traditional target costing methodology. By grouping these streams into three research scopes, we outline the achieved progress as well as remaining tasks for further enhancements. Due to the abundance of these tasks, we align them with six future themes of management accounting that we identified as being particularly influential to target costing. As a result, six promising topics for researchers to advance target costing are determined. Additionally, our findings reveal to managers of which issues they should be particularly aware with respect to the performance of their target costing processes.
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Standard costs are costs that would arise at a particular moment for the future product, given an organisation’s current manufacturing capabilities, standards and cost structures (Flik et al. 1998 ; Krapp and Wotschofsky 2000 ; Kremin-Buch 2007 ). These costs are not fixed but can be influenced by cost management activities. Accordingly, the term standard costs is used to describe current costs that are determined at any point in time throughout the product development process for a future product.
Cooper and Slagmulder ( 1999 , p. 30) characterise value engineering as “a multidisciplinary approach to product design that maximizes customer value; it increases functionality and quality while reducing cost.” Related to the understanding of early cost commitment, value engineering activities begin in parallel with the first stages of a product development process (Kato 1993 ). Here, the potentially high cost influencing capacity represents a great opportunity to align functionality and cost objectives (Newman and McKeller 1995 ). The intensity of value engineering activities should be particularly high before design drawings are fixed (Yasukata et al. 2013 ).
In addition to this focus on methodological developments, there are other streams of research concerning target costing. For instance, Cinquini et al. ( 2015 ) as well as Yazdifar and Askarany ( 2012 ) explore target costing’s diffusion in different companies or between countries. Other authors analyse changes necessary for adapting target costing to other industries, such as the assembly business (see, e.g., Everaert et al. 2006 ; Jack and Jones 2008 ), or in the context of the globalisation of companies and their supply chains (see Seidenschwarz 2008 ). Additionally, Cadez and Guilding ( 2008 ) as well as Chenhall ( 2003 ) examine factors that influence the application of target costing in companies.
We follow Atkinson et al.’s ( 2012 ) distinction here. As such, a product’s life-cycle consists of three phases: (1) development phase, (2) market phase and (3) post-sale phase.
For a discussion of possibilities of target costing for start-ups in regard to a lean start-up management, see Seidenschwarz ( 2015 ).
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Ahn, H., Clermont, M. & Schwetschke, S. Research on target costing: past, present and future. Manag Rev Q 68 , 321–354 (2018). https://doi.org/10.1007/s11301-018-0141-y
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DOI : https://doi.org/10.1007/s11301-018-0141-y
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Cost Analysis for Decision Making and Control: Marginal Costing versus Absorption Costing
10 Pages Posted: 28 Mar 2014
Darshana Lakmal
Eastern University, Sri Lanka
Date Written: March 27, 2014
Purpose – Management requires adequate, systematic and useful cost data and reports to manage a business enterprise and to achieve its business objectives. The useful information provided by cost records and reports in cost accounting assist management in making their decisions. Therefore, Management Accounting may be defined as the application of accounting techniques for providing information designed to aid all levels of management in planning and controlling the activities of the business enterprise in decision making. Marginal costing is a costing technique in which only variable manufacturing cost are considered and used while valuing inventories and determining the cost of goods sold. That is, only variable manufacturing costs are considered product cost and are allocated to products manufactured. Absorption cost also known as full costing is a costing technique in which all manufacturing costs, variable and fixed are considered as cost of production and are used in determining the cost of goods manufactured and inventories. All manufacturing costs are fully absorbed in to finished goods. Traditional absorption costing systems have long been subject to criticism. Two long-standing issues have been the choice of appropriate overhead recovery rates and secondly the controversy about the need to allocate overheads at all. During the last two decades the problems of traditional absorption costing and marginal costing were again brought under the spotlight. The paper extends the previous research and literature review that investigate marginal and absorption costing methods whose obviously each have their supporters and arguments both in favor of and against each method.
Keywords: Marginal Costing, Absorption Costing, Variable Cost
JEL Classification: M11, M40, M41
Suggested Citation: Suggested Citation
Darshana Lakmal (Contact Author)
Eastern university, sri lanka ( email ).
Vantharumoolai Chenkalady, Eastern 30350 Sri Lanka
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A PROJECT REPORT ON THE TOPIC Process costing
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The preparation. of a production cost report includes the five. steps (Blocher et al ., 2010: p. 184): Step 1: Analyze the Physical Flow of Produc tion Units. The first step deter mines the number ...
The Journal of Corporate Accounting & Finance is an international corporate finance journal aiming to advance the field through academic research and real-world practice. Process Costing: The Most Important Subject in the Management Accountant's Curriculum - Vercio - 2018 - Journal of Corporate Accounting & Finance - Wiley Online Library
Five Steps in Process Costing. Step 1: Summarize the flow of physical units of. output. Step 2: Compute outpu t in terms of equivalent u nits. Step 3: Compute equiv alent unit costs. Step 4 ...
This type of system is dif ferent from job order cost. accumulation in terms of: 1) the manner in which the cost flow through the accounts, 2) the terminology and concepts involved, and 3) how ...
A producer also has to learn about their company's production process so their target can be optimized well and their expenditure can be managed well. Therefore, in this paper we will explain about process cost. Process cost that has a connection with company's attempt to receive process factors and the calculation inside.
Find a journal Publish with us Track your research Search. Cart. ... One notable study by R. Cooper and R.S. Kaplan highlights the benefits of integrating process-oriented costing (POC) with activity-based costing (ABC) to enhance the accuracy of cost information and identify opportunities for cost savings. ... Cite this paper. Naugolnova, I.A ...
USING PROCESS COSTING METHOD IN SULI TOFU FACTORY Rumanintya Lisaria Putri University of Islam Balitar Blitar ... @gmail.com (Submit : 4 Desember 2017, Revised 14 December 2017, Accepted : 21 December 2017) Abstract. This research took place at Suli Tofu Factory which aims to (1) to know the method ... citation and similar papers at core.ac.uk ...
TRACE: Tennessee Research and Creative Exchange Masters Theses Graduate School 5-2019 A Comparative Analysis of Activity Based Costing and Standard Costing in Tracing the Effect of Lean Implementation in a Deterministic Process Abhinav Raghavan University of Tennessee, [email protected]
After more than 30 years of using Activity-Based Costing (ABC) to determine costs, just a few studies have analyzed its publications. This article aims to conduct a systematic, comprehensive literature review analyzing papers on ABC to overview what has been researched and give future research directions.
The following article presents issues of precise estimating of process cost using the method of cost account based on Activity Based Costing. The general question is why traditional cost calculation methods are not exact enough to determine the process cost of contemporary production processes and what solutions may be proposed to increase the accuracy of calculations.
5 Conclusion. Although target costing is an extensively studied topic, a holistic investigation into its methodological developments is missing. The paper seeks to fill this gap, revealing that research in this context is far from reaching maturity. Based on a systematic literature review, our state-of-the-art analysis of 90 articles in highly ...
In order to locate papers relevant to this review in the Scopus database, a research series was devised for this investigation containing the terms "costing systems", "quality costing ", "Manufacturing Firms" and "costing activities." The research was not restricted to a specific period or journal.
Marginal costing is a costing technique in which only variable manufacturing cost are considered and used while valuing inventories and determining the cost of goods sold. ... The paper extends the previous research and literature review that investigate marginal and absorption costing methods whose obviously each have their supporters and ...
1. Introduction. The Activity-Based Costing (ABC) system was first demonstrated by Johnson and Kaplan (1987) as a new, advanced method for calculating production costs. The ABC system can be defined as a system to measure the cost and effectiveness of activities, products, and services on the basis of resources used to create the product or service.
Cost system of the model winery was assumed to have process costing system based on actual complete cost and costing was made accordingly. The objective of the study is to put forward the costs at every stage of production at wineries and establish a cost system through unit cost calculations and reveal the impacts of the outcomes on management ...
Chapter 6. COSTING MODELS: A COMPARISON. Janek Ratnatunga, Michael S. C. Tse and Kashi R. Balachandran. ABSTRACT. Despite its theoretical superiority, the Activity-Based Costing (ABC) model has ...
This paper will investigate the controversy that is innate between the two costing techniques; Absorption Costing and Marginal Costing and would throw light on which costing technique better serves its purpose in helping management for decision making process and if Marginal Costing technique is concluded as better technique then why it should not be used for external reporting purpose.
accounting techniques, such as Target Costing (TC), requires organizations to be able to deal with challenges and problems that may occur during the adoption process. In today's competitive environment, many companies are continuously seeking to produce high quality and functional products based on customers' expectations gleaned from market
costs - target costs, 1 the target reduction in the pro duct costs (a) = $45.039 - $44.615 = $0.424. 2 the target reduction in the p roduct costs (b) = $55.539 - $53.84 6 = $1.693. Table 13 ...
Product costing is the process of tracking and analyzing all of the costs incurred in the production and sale of a product ... Multi-Service Microfinance Institutions," Occasional Paper, no. 2 (Washington, DC: CGAP) provides an in-depth discussion on cost allocation ... Research and publications: Market demand studies, technical papers Grants ...
Process Costing : Valuation Of WIP Valuation of WIP is the distinctive feature of process costing. It is done on the basis of equivalent Production. Equivalent Production = No. of Units in the process * % of work completed Weighted Average Method. Procedure Step 1 Summarise the flow of physical units.
According to Hardan and Shatnawi (2013), Activity-Based Costing (ABC) was created at the end of the 1980s as a costing methodology that overcame the limitations of previous systems by providing ...
Abstract. This paper addresses job costing, activity-based costing, cost management and cost control in Kenya and Unilever Kenya. The paper provides a glimpse of how these cost structured are ...