Characteristics of target costing: theoretical and field study perspectives

Patricia C. Everaert · Stijn Loosveld · Tom Van Acker · Marijke Schollier · Gerrit Sarens

66 citations0/0 files storedQualitative Research in Accounting & Management

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Accounting and Organizational Management Accounting Theory and Financial Reporting Corporate Governance and Management

Abstract

Purpose Despite appearing in the literature over 10 years ago as a potentially exciting cost management technique, there is still limited agreement about the nature of target costing. The purpose of this study is to explore the characteristics of target costing, and to test whether these characteristics were adopted in three European companies that used target costing. Design/methodology/approach This paper draws on case study data, collected at three manufacturing companies (consumer electronics, machinery, and transportation equipment). Findings The paper identifies eight characteristics of target costing, based on the early Japanese case descriptions. These characteristics are related to the way a target is set and how progress towards that target is measured. The findings of the case studies confirm these characteristics. However, some differences were found regarding the interpretation of the strict rule that “the target cost cannot be exceeded at product launch”. Research limitations/implications The results indicate that future research on the adoption of target costing cannot be disconnected from its characteristics. Further studies might investigate whether degree of openness to suppliers, leadership position, time pressure and position in the supply chain can explain the noted differences in characteristics among companies. Practical implications The characteristics identified in this paper provide an aid to researchers and managers considering target costing. Detailed case descriptions provide best practices examples for other companies. Originality/value This study is the first empirical paper concerned with describing the typical characteristics of target costing. By exploring the characteristics, we hope to inspire others to further explore this interesting phenomenon.

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References

1998Adoption and benefits of management accounting practices: an Australian study 2000An international comparison of strategic management accounting practices 2017Target Costing and Value Engineering 1986The role for empirical research in management accounting 2001The international diffusion of new management accounting practices: the case of India 1993Target costing support systems: lessons from leading Japanese companies 2003A survey of the adoption and use of target costing in Dutch firms 1997Target costing: the next frontier in strategic cost management

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2011A comparative study of the adoption and implementation of target costing in the UK, Australia and New Zealand 2011An Investigation into the Adoption of Target Costing on Brazilian Public Social Housing Projects 2016Managerialist studies in management accounting: 1990–2014 2009Peut-on gérer le couple coûts-valeur ?2018Research on target costing: past, present and future

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