Contemporary times are characterized by quick, dynamic, and continuing changes in the
economy. Therefore, companies have to adapt flexibly and innovatively to these
changes in order to stay competitive and cope with the increasing pressure of competition.
In particular, Asian and East-European competitors gain market share by offering
products of better quality than in earlier times and for lower costs. Under these conditions,
costs represent a fundamental factor for the success of western companies. Accordingly,
management and employees have to fully exploit the potential that cost management
and reduction measures offer. However, costs are not the only buying decision
criterion. Customers expect products with high quality but for a low or moderate price.
Correspondingly, companies have to adjust their new product developments and production
systems to market requirements. This can be achieved by the Target Costing
approach, a tool that is applied in more and more companies.
Therefore, the aim of this essay is to explain the goals and method of Target Costing. It
starts with giving some background information about Target Costing and its historical
development. Chapter three describes the goals of Target Costing. Then, the Target
Costing process is explained in detail. Finally, this essay concludes by discussing that
Target Costing is an effective cost management tool for developing new products according
to market requirements.
[...]
Table of Contents
- Introduction
- Basic ideas and historical development of Target Costing
- Definition of Target Costing
- Historical development
- Areas of application
- Separation from regular cost accounting
- Goals of Target Costing
- Target Costing process
- Market information as basis for Target Costing
- Definition of target costs
- Splitting of target costs
- Achievement of target costs
- Conclusion
Objectives and Key Themes
The essay aims to explain the goals and methods of Target Costing, a cost management tool increasingly used by companies to adapt to dynamic economic changes and competitive pressures. It explores Target Costing's historical development and its strategic importance in new product development.
- Definition and historical development of Target Costing
- The goals of Target Costing as a strategic cost management tool
- The Target Costing process, including market analysis and cost definition
- Target Costing's role in adapting to market requirements and competitive pressures
- The importance of early cost planning in product development
Chapter Summaries
Introduction: This introductory chapter sets the stage by highlighting the dynamic and rapidly changing economic landscape. It emphasizes the increasing pressure on Western companies to compete with Asian and East-European rivals offering higher quality at lower costs. The chapter argues that cost management is crucial for success, but must be balanced with the need to deliver high-quality products at competitive prices. Target Costing is introduced as a solution to meet these market demands, setting the context for the essay's subsequent exploration of its goals and methods.
Basic ideas and historical development of Target Costing: This chapter delves into the core concepts of Target Costing, acknowledging the lack of a universally accepted definition. It presents a commonly used definition, highlighting Target Costing as a strategic cost management tool involving early cost planning and coordination across departments. The historical development of Target Costing is traced, providing context for its current applications and significance in the modern business world. The chapter contrasts Target Costing with traditional cost accounting approaches, emphasizing its proactive and market-driven nature.
Goals of Target Costing: This section focuses on the overarching objectives of the Target Costing approach. It explains how the method helps companies achieve specific business goals, by directly linking cost targets to market requirements and overall profit goals. The chapter would likely elaborate on the strategic advantages of Target Costing, showing how early cost planning and control contribute to successful product launches and sustained profitability.
Target Costing process: This chapter provides a detailed explanation of the step-by-step implementation of Target Costing. It outlines the process from initial market research to the final achievement of target costs. The chapter likely covers key stages such as target cost definition, cost breakdown, and strategies for achieving the defined target costs. Specific methods and tools used in each step would be explained. It would likely emphasize the iterative and collaborative nature of the process, involving various departments within the company.
Keywords
Target Costing, cost management, strategic cost management, product development, market requirements, competitive pressure, cost planning, cost control, new product development, cost accounting.
Frequently Asked Questions: A Comprehensive Guide to Target Costing
What is this document about?
This document provides a comprehensive preview of a text focused on Target Costing. It includes a table of contents, objectives and key themes, chapter summaries, and keywords. The document aims to explain the goals and methods of Target Costing, a strategic cost management tool used to adapt to dynamic economic changes and competitive pressures.
What is Target Costing?
Target Costing is a strategic cost management tool that involves early cost planning and coordination across departments. It's used to ensure that products are developed and sold at a price that meets market demands while achieving profit goals. The document emphasizes that there isn't a universally accepted definition, but it presents a common understanding of the concept.
What are the main objectives of the text?
The text aims to explain the goals and methods of Target Costing, its historical development, and its strategic importance in new product development. It explores how Target Costing helps companies adapt to market requirements and competitive pressures by directly linking cost targets to market requirements and overall profit goals.
What are the key themes explored in the text?
Key themes include the definition and historical development of Target Costing; its goals as a strategic cost management tool; the Target Costing process, including market analysis and cost definition; its role in adapting to market requirements and competitive pressures; and the importance of early cost planning in product development.
What are the key stages in the Target Costing process?
The Target Costing process, as outlined in the document, involves several key stages: market information as a basis, definition of target costs, splitting of target costs, and achievement of target costs. The process is described as iterative and collaborative, involving various departments within the company.
How does Target Costing differ from traditional cost accounting?
The document highlights that Target Costing is proactive and market-driven, unlike traditional cost accounting approaches. It emphasizes early cost planning and the direct link between cost targets and market requirements.
What is the historical context of Target Costing?
The text traces the historical development of Target Costing, providing context for its current applications and significance in the modern business world. This historical perspective helps to understand its evolution and relevance in today's competitive landscape.
What is the significance of early cost planning in Target Costing?
Early cost planning is presented as a crucial element of Target Costing. By planning costs early in the product development process, companies can better align their product development with market requirements and ensure profitability.
What are the key benefits of using Target Costing?
Target costing helps companies achieve specific business goals by linking cost targets to market requirements and profit goals. It allows for successful product launches and sustained profitability through early cost planning and control, facilitating adaptation to market demands and competitive pressures.
What are the keywords associated with Target Costing?
The keywords associated with this topic include: Target Costing, cost management, strategic cost management, product development, market requirements, competitive pressure, cost planning, cost control, new product development, and cost accounting.
- Quote paper
- Hendrik Vedder (Author), 2007, The Target Costing Approach, Munich, GRIN Verlag, https://www.grin.com/document/119311
