IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Cost Measurement And Cost Management In Target Costing

Listed author(s):
  • Moisello Anna Maria


    (University of Pavia, Economics)

Registered author(s):

    Firms are coping with a competitive scenario characterized by quick changes produced by internationalization, concentration, restructuring, technological innovation processes and financial market crisis. On the one hand market enlargement have increased the number and the segmentation of customers and have raised the number of competitors, on the other hand technological innovation has reduced product life cycle. So firms have to adjust their management models to this scenario, pursuing customer satisfaction and respecting cost constraints. In a context where price is a variable fixed by the market, firms have to switch from the cost measurement logic to the cost management one, adopting target costing methodology. The target costing process is a price driven, customer oriented profit planning and cost management system. It works, in a cross functional way, from the design stage throughout all the product life cycle and it involves the entire value chain. The process implementation needs a costing methodology consistent with the cost management logic. The aim of the paper is to focus on Activity Based Costing (ABC) application to target costing process. So: - it analyzes target costing logic and phases, basing on a literary review, in order to highlight the costing needs related to this process; - it shows, through a numerical example, how to structure a flexible ABC model -characterized by the separation between variable, fixed in the short and fixed costs - that effectively supports target costing process in the cost measurement phase (drifting cost determination) and in the target cost alignment; - it points out the effectiveness of the Activity Based Costing as a model of cost measurement applicable to the supplier choice and as a support for supply cost management which have an important role in target costing process. The activity based information allows a firm to optimize the supplier choice by following the method of minimizing the total cost of ownership (TCO). Moreover the activity based analyses reveals the opportunities for rationalizing the supply related activities and containing costs and it enables the effective involvement of the supplier in the process of target costing when he provides activity based information on the costs sustained to produce the product/service: the purchaser can evaluate the impact, in terms of cost, of the activities requested of the supplier and, as a result, he has the chance to rationalize these activities by reducing their number or intensity and enables the effective involvement of the supplier in the process of target costing. The paper gives a contribution in the advancement of costing methodologies applicable to the target costing, proposing the use of a flexible model that supports the decision process according to different time horizons so that effectively supports target costing. The model is suitable for production characterized by high complexity in terms of number and intensity of activities

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Article provided by University of Oradea, Faculty of Economics in its journal The Journal of the Faculty of Economics - Economic.

    Volume (Year): 1 (2012)
    Issue (Month): 1 (July)
    Pages: 533-547

    in new window

    Handle: RePEc:ora:journl:v:1:y:2012:i:1:p:533-547
    Contact details of provider: Postal:
    Universitatii str. 1, Office F209, 410087 Oradea, Bihor

    Phone: +40259408799
    Fax: 004 0259 408409
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Zeger Degraeve & Filip Roodhooft, 2000. "A Mathematical Programming Approach for Procurement Using Activity Based Costing," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(1&2), pages 69-98.
    2. Patricia Everaert & Stijn Loosveld & Tom Van Acker & Marijke Schollier & Gerrit Sarens, 2006. "Characteristics of target costing: theoretical and field study perspectives," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 3(3), pages 236-263, September.
    3. Ben-Arieh, David & Qian, Li, 2003. "Activity-based cost management for design and development stage," International Journal of Production Economics, Elsevier, vol. 83(2), pages 169-183, February.
    4. Roodhooft, Filip & Konings, Jozef, 1997. "Vendor selection and evaluation an Activity Based Costing approach," European Journal of Operational Research, Elsevier, vol. 96(1), pages 97-102, January.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ora:journl:v:1:y:2012:i:1:p:533-547. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catalin ZMOLE)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.