Target Costing Functions

This article aims to highlight the concept of Target Costing. Based on the characteristics of Target Costing, identified in specialized literature, the article presents its main advantages and disadvantages. Also, a comparison is being made between Target Cost and Traditional Cost (in its traditional form, the cost represents an independent variable on the basis of which the sell price is established; and in the Target Cost form the cost represents a dependent variable which is determined on the basis of selling price), and between Target Cost and Standard Cost (the difference between Target Cost and Standard Cost is the same as the one between cost reduction and cost control: Target Cost generates structural improvements and Standard Cost generates operational improvements). After a thorough review of the specialized literature and taking into account the fact that this concept represents in fact a management method, the authors identify and present the most important functions of the Target Costing: analysis of market and product characteristics function, informative function, decisional function, the function of stimulating designing for manufacturing, integrative function, coordination function, warning function and continuous function.