Accounting for preference dependency in target costing – a note

Homburg, Carsten; Hoppe, André; Schick, Roman; Braul, Amelie

doi:10.1007/s11156-021-00962-9

Cited by 5 publications

(5 citation statements)

References 18 publications

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“…This decision directly affects the possibility of marketing the product and the level of profitability, as well as the ability of the establishment to remain in the market and continue its competitiveness. (Mores et al, 2003;Homburg et al, 2021).…”

Section: Product Pricingmentioning

confidence: 99%

The Impact of Applying the Target Cost Approach on Products' Structure (Products Pricing, Development and Quality)

Masadeh¹,

Jrairah²,

Almasria³

2023

J. Professional Business Review

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Purpose: This study aimed to examine the effect of applying the target cost approach on product structure in industrial public shareholding companies in Jordan. Theoretical framework: The purpose of applying target cost approach on products' structure (products pricing, development and quality) and it is ability to reduce costs and improvements that can be obtained in the process of applying target cost approach. Numerous research related to applying target cost approach have been conducted, with the majority focusing on large companies. However, Jordanian industrial companies have limitations compared to large companies. Repairability is considered for cost optimization. Design/methodology/approach: The study uses the analytical approach through the study tool (Questionnaire). The study population consisted of Jordanian industrial companies, which reached (56) companies in 2022, according to the monthly statistical periodical of the Amman Stock Exchange (ASE). A sample of (42) companies was selected, and the questionnaire was distributed to (The Financial Manager, Production Manager, Sales Manager, and Accountant) for each company. The number of questionnaires approved for statistical analysis was (130), representing (77%) of the distributed questionnaires. This study uses different tests to analyze the data and extract results related to the statistical methods, i.e., the descriptive statistic, Cronbach's Alpha Equation, Pearson's Correlation Coefficient, and Simple Linear Regression Analysis. Findings: The study found that there is a strong relationship between the target cost approach and the product structure, with the existence of a statistically-significant effect, whereas the correlation coefficient value reached (0.808); thus, the target cost approach contributes to developing products and improving profitability through focusing on the analysis process of the possibilities of product success, before allocating the productive resources thereof. It has also contributed to reducing the cost during the production stages from its beginning while maintaining the products' quality, and it also leads to increasing sales volume through the pricing mechanism based on the target cost. Through the answers of the study sample individuals, it is pointed out that the arithmetic mean of the target cost approach is high, as it reached (3.77) and the standard deviation is (0.57), as well as the arithmetic means of the products' structure is high, as the pricing element came in the first class, with arithmetic means of (3.86) and standard deviation of (0.51), then the development element came in the second class, with arithmetic means of (3.78) and standard deviation of (0.58), whereas the quality element came in the third-class, with arithmetic means of (3.75) and standard deviation of (0.53). The results of the regression analysis also indicate that there is a statistically significant effect of the target cost approach on the quality of products, with (R²) (46.3%) which represents the proportion of explanation in the variance of the dependent variable. The findings of the study highlighted that there is a statistically-significant effect of the target cost approach in product development with (R²) with (37.5%) which indicates that the target cost explains (37.5%) of the difference in the product development. The results also indicate that there is a statistically significant effect of the target cost approach in product pricing with R) value indicating a high-strength correlation between the target cost approach and product pricing, which is (0.812). Research Practical implications: It is necessary to pay attention to qualifying workers by developing programs that deal profoundly with the approachs and modern systems of costs, such as the target cost system and the value chain as these approachs and accounting systems will be intensively adopted in the future for their outstanding role in developing product performance, Pricing and improving its quality. Originality/value: The study recommended that it is necessary to develop successful products and price them based on the target cost by balancing the company's ability and customers' needs, as well as using methods that lead to consistency and harmony between products' quality and customers' expectations. The study also recommended focusing on qualifying workers by developing programs that profoundly tackle the approaches and modern systems of costs, such as the target costing system

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Section: Product Pricingmentioning

confidence: 99%

The Impact of Applying the Target Cost Approach on Products' Structure (Products Pricing, Development and Quality)

Masadeh¹,

Jrairah²,

Almasria³

2023

J. Professional Business Review

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“…The customer needs, and continuous improvement are incorporated into the formulation of the current price. This fits into the value stream as waste is targeted, and its value is observed when adding to the company's cost and the consumer's price (Kennedy & Brewer, 2005;Homburg, Hoppe, Schick & Braul, 2021).…”

Section: Target Costingmentioning

confidence: 99%

Lean Accounting: A Decision-Making Tool

Goad,

Fischer

2024

JMPP

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Lean accounting is a management decision-making tool available to companies involving streamlining a company’s competitive internal management strategy to minimize waste, such as excess inventory, to maximize profits. This exploration of lean accounting processes looks at how companies can maximize continuous improvement using reporting and accounting methods. Barriers to lean accounting implementation are identified together with means for their resolution. The basic understanding of lean accounting is it targets waste and non-value-adding activities especially those that do not benefit the internal or external stakeholder in the manufacturing or service setting. Lean accounting offers specific styled reports, performance measures.

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“…It is possible to think of target costing as a cost management system that focuses on price, customer, and project by incorporating various organizational functions (Abd; Jasim, 2019; Mao; Chen, 2021; Toosi; Chamikarpour, 2021). Its main objective is to adjust the operating cost of a product, i.e., a good or a service, to determine the target price and desired margins in the context of the company's strategic planning (Baharudin;Jusoh, 2019;Homburg et al, 2021a).…”

Section: Target Costingmentioning

confidence: 99%

“…However, its operationalization requires companies to have a detailed understanding of the product to be manufactured in terms of its physical characteristics, as well as the production system and operational methods. The data used to generate the information must be as realistic as possible, and there is not always this economic-financial control by the organizations, especially in the case of small companies, which limits the use of the method (Homburg et al, 2021b).…”

Section: Target Costingmentioning

confidence: 99%

Tools for cost management

Silva,

Leite

2024

Revista PO: R. Eletr. de Eng. de Produção e Correlatas

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This article aims to provide an overview of the literature in which cost assessment methods are currently used, and their characteristics and limitations are also pointed out. To achieve the proposed objectives, a Systematic Literature Review (RSL) was conducted. It was possible to identify the tools discussed in the bibliographic portfolio studied, namely: life cycle costing, target costing, the total cost of ownership, activity-based costing, variable costing, and mathematical models, as well as the difficulties in implementing these tools in different application contexts. It has also been noted that multiple tools are often employed in integrated methodologies to mitigate the inherent limitations of individual models when treated in isolation. The significance of this article resides in its contribution to the discourse on the evolution of cost management tools and their application within integrated approaches, particularly in addressing the typical challenges encountered in emerging business models.

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Accounting for preference dependency in target costing – a note

Cited by 5 publications

References 18 publications

The Impact of Applying the Target Cost Approach on Products' Structure (Products Pricing, Development and Quality)

The Impact of Applying the Target Cost Approach on Products' Structure (Products Pricing, Development and Quality)

Lean Accounting: A Decision-Making Tool

Tools for cost management

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