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Target costing operationalization during product development: Model and application

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  • Filomena, Tiago Pascoal
  • Neto, Francisco Jos Kliemann
  • Duffey, Michael Robert

Abstract

Target costing is a widely used technique for cost management during product development (PD). Despite target costing's strategic intuitiveness, its operationalization during PD requires careful decomposition of a product's constituent cost elements. The main objective of this paper is to describe an experience developing early-stage cost parameters for a specific product development process effort at a mid-sized Brazilian manufacturing company by proposing and applying a target costing model. One secondary objective is to provide a model to operationalize "target costing" by breaking down cost targets into product parts, features and common elements, focusing on creating parameters for cost control during PD. Using a detailed case study, target costing is explicitly decomposed in four different stages in a PD environment. All these are intended as a complement to the strategic use of target costing.

Suggested Citation

  • Filomena, Tiago Pascoal & Neto, Francisco Jos Kliemann & Duffey, Michael Robert, 2009. "Target costing operationalization during product development: Model and application," International Journal of Production Economics, Elsevier, vol. 118(2), pages 398-409, April.
    • Handle: RePEc:eee:proeco:v:118:y:2009:i:2:p:398-409
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    References listed on IDEAS

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    Cited by:

    1. Odysseas Pavlatos & Hara Kostakis, 2022. "Exploring the Relationship between Target Costing Functionality and Product Innovation: The Role of Information Systems," Australian Accounting Review, CPA Australia, vol. 32(1), pages 124-140, March.
    2. Yazdifar, Hassan & Askarany, Davood, 2012. "A comparative study of the adoption and implementation of target costing in the UK, Australia and New Zealand," International Journal of Production Economics, Elsevier, vol. 135(1), pages 382-392.
    3. Bock, Stefan & Pütz, Markus, 2017. "Implementing Value Engineering based on a multidimensional quality-oriented control calculus within a Target Costing and Target Pricing approach," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 146-158.
    4. Gopalakrishnan, Mohan & Libby, Theresa & Samuels, Janet A. & Swenson, Dan, 2015. "The effect of cost goal specificity and new product development process on cost reduction performance," Accounting, Organizations and Society, Elsevier, vol. 42(C), pages 1-11.
    5. Kee, Robert, 2010. "The sufficiency of target costing for evaluating production-related decisions," International Journal of Production Economics, Elsevier, vol. 126(2), pages 204-211, August.
    6. Stadtherr, Frank & Wouters, Marc, 2021. "Extending target costing to include targets for R&D costs and production investments for a modular product portfolio—A case study," International Journal of Production Economics, Elsevier, vol. 231(C).

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