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Target Cost – Tool For Planning, Managing And Controlling Costs

Author

Listed:
  • Emilia VASILE

    () (“Athenaeum” University of Bucharest)

  • Ion CROITORU

    () (“Athenaeum” University of Bucharest)

Abstract

The target costing method involves implementing a homogeneous set of tools on cost planning, cost management and cost control. This method aims to reduce costs by knowing the different stages of a product cycle, analyzing the costs of each phase and improving the technologies and manufacturing processes. The managers of economic organizations are using the target costing method to determine with certainty the limit cost of their new products and to set a target price of the product in order to obtain a higher profit. The target costing method is not only a method of costing calculation but also a modern management method that uses evaluated techniques regarding market study, value analysis, reducing diversity, manufacturing technology and the relationship with suppliers and customers. Target cost is an estimated production cost, calculated on the basis of a forecast competitive selling price and a projected profit margin. It has values between the allowable cost, which is determined by the market according to the competition and the estimated cost, which is determined according to the existing means of production and the technologies used by the organization.

Suggested Citation

  • Emilia VASILE & Ion CROITORU, 2013. "Target Cost – Tool For Planning, Managing And Controlling Costs," Romanian Journal of Economics, Institute of National Economy, vol. 36(1(45)), pages 114-127, June.
  • Handle: RePEc:ine:journl:v:2:y:2013:i:44:p:114-127
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    More about this item

    Keywords

    target cost; costs calculation; market cycle; production organization; product;

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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