research paper on process costing

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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Strategic Management Research in Management Journals

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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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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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Management educator: courses, cases & teaching ejournal, applied accounting - practitioner ejournal, manufacturing, service, & supply chain operations ejournal, organizations & markets: policies & processes ejournal, decision-making in economics & finance ejournal, management practice ejournal.

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A PROJECT REPORT ON THE TOPIC Process costing

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