Target Costing Calculation and Economic Gain for Companies

Jaroslava Kaacute;daacute;rovaacute; ^a*, Katariacute;na Teplickaacute; ^b, Michaela Durkaacute;thorn;ovaacute; ^a, Marek Vida ^c

Abstract

This paper deals about the problematic of target costing implementation into the managerial decisions. These decisions make value analysis principles for increasing in competitiveness by the setting off limits for maximum allowable costs which should not exceeded by company manufacturing. By this approach is possible to improve product quality, service, shortening the research and development period and continual effort to lower costs. Target costing as a modern method of calculation uses the principles of value analysis, by using instruments of functional cost analysis and quantitative-function deployment can provide a functional differentiation of the product. This approach has a high importance for quality assurance in pre-production phase and itrsquo;s increasing. Application of target costing is growing in praxis still. Target costing calculation introduce system approach to quantify costs of product in the phase of constructive and development activities of production. Comparison target costing calculation and traditional calculation show target gap. Target costing calculation is new modern instrument that it facilitates to manage price of product by the customersrsquo; requirements. The price is determined by market and customerrsquo;s needs. In this phase is possible to fix costs of product. In praxis we often meet with situation where the price of product is very high and customer is not ready to pay so much. Target costing calculation limits cost of production.

Introduction

The calculation of product is today very important and the calculation is necessary in term of customer requests and customer needs. By the creation of calculation is important to accept quality of product and to value price of product following the quality. Today customers influence price of product by specifications of product and producers, businessmen must to adapt price of product to customer requirements. This reason is stimulus to change creation of calculation and to use new modern methods of calculation for example activity based costing, target costing, kaizen costing, job costing, and inventory costing and other. Utilization of these methods in companies in manufacturing company brings some specifics. These methods produce better evidence of costs and price of product but they are very difficult to introduce in praxis (Popesko, 2010). Integral part of calculation creation is knowledge management that will be orientated to know everything about customer and needs of customers, market specifications and possibilities how to be competitive, something about competition and her strategy in area of calculation.

Target costing method demands to monitor market price and price of competitive. The price of product consists of cost items that we must reduce. Direct and indirect costs will be reduced by using of new methods. Very important part of price is profit. We must accept profit charge by the creation of calculation. Target costing calculation is a part of value analysis that is a very important tool that can increase the competitiveness of outputs in each branch of industry. Value analysis represents a systematic approach to evaluation of product characteristics that enables to fix alternatives that can improve the product quality, defined as the proportion of its commercial characteristics and costs.

Project aim: The main goal of this project is to present target costing calculation and its using in wood processing industry by the creation of price calculation. We would like present advantages and disadvantages of this calculation method in company and to compare this progressive method with classical method of cost calculation

Research methodology

Target costing calculation also referred to as target oriented method of costing calculation has its origins in Japan. In 1980rsquo;s it spread to our continent through American daughter companies in Western European countries. In 1990rsquo;s more than 80 % of engineering and electro technical industry companies in Japan used this method of calculation (Tumpach, 2008). Target costing is not just a cost reduction technique or control framework but part of the comprehensive strategic profit management system including value analysis and value engineering (Helms, Ettkin, Baxter amp; Gordon, 2005).

The primary task is not to find out how much a product costs, but how much a product can cost so that it is possible to be sold for a particular market price. Calculation as a pricing tool is in the areas of strong competition therefore slowly losing its significance. Price is determined by the market and it is not possible to offer the product at the market for a higher price. Thus companies have to manufacture products with such costs which can be covered by the final price. Therefore it is important to plan costs not only in the manufacturing stage but at the initial stages of the production performance. Production costs are influenced especially by its characteristics and manufacturing methods.

Majority of performance costs are decided already in pre-manufacturing stages since there are already determined such factors as technological progress and performance characteristics. It is proved that 85 to 90% of costs relating to performance are the result of decision made in pre-manufacturing stages (Foltiacute;novaacute;, et al., 2007). The basic idea of target costing calculation is in setting the limits for maximum allowable costs which should not exceeded by company manufacturing. This limit is untraditionally set on the basis of technical and economic standards of tangible consumption but as the rest which remains from the product price minus the target required profit (Foltiacute;novaacute;, et al. (2007). Allowable costs are

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武汉理工大学毕业论文

论管理会计成本管理应用指引在企业的实施问题

外文翻译

Target Costing Calculation and Economic Gain for Companies

Jaroslava Kaacute;daacute;rovaacute; ^a*, Katariacute;na Teplickaacute; ^b, Michaela Durkaacute;thorn;ovaacute; ^a, Marek Vida ^c

Abstract

This paper deals about the problematic of target costing implementation into the managerial decisions. These decisions make value analysis principles for increasing in competitiveness by the setting off limits for maximum allowable costs which should not exceeded by company manufacturing. By this approach is possible to improve product quality, service, shortening the research and development period and continual effort to lower costs. Target costing as a modern method of calculation uses the principles of value analysis, by using instruments of functional cost analysis and quantitative-function deployment can provide a functional differentiation of the product. This approach has a high importance for quality assurance in pre-production phase and itrsquo;s increasing. Application of target costing is growing in praxis still. Target costing calculation introduce system approach to quantify costs of product in the phase of constructive and development activities of production. Comparison target costing calculation and traditional calculation show target gap. Target costing calculation is new modern instrument that it facilitates to manage price of product by the customersrsquo; requirements. The price is determined by market and customerrsquo;s needs. In this phase is possible to fix costs of product. In praxis we often meet with situation where the price of product is very high and customer is not ready to pay so much. Target costing calculation limits cost of production.

1.Introduction

The calculation of product is today very important and the calculation is necessary in term of customer requests and customer needs. By the creation of calculation is important to accept quality of product and to value price of product following the quality. Today customers influence price of product by specifications of product and producers, businessmen must to adapt price of product to customer requirements. This reason is stimulus to change creation of calculation and to use new modern methods of calculation for example activity based costing, target costing, kaizen costing, job costing, and inventory costing and other. Utilization of these methods in companies in manufacturing company brings some specifics. These methods produce better evidence of costs and price of product but they are very difficult to introduce in praxis (Popesko, 2010). Integral part of calculation creation is knowledge management that will be orientated to know everything about customer and needs of customers, market specifications and possibilities how to be competitive, something about competition and her strategy in area of calculation.

Target costing method demands to monitor market price and price of competitive. The price of product consists of cost items that we must reduce. Direct and indirect costs will be reduced by using of new methods. Very important part of price is profit. We must accept profit charge by the creation of calculation. Target costing calculation is a part of value analysis that is a very important tool that can increase the competitiveness of outputs in each branch of industry. Value analysis represents a systematic approach to evaluation of product characteristics that enables to fix alternatives that can improve the product quality, defined as the proportion of its commercial characteristics and costs.

Project aim: The main goal of this project is to present target costing calculation and its using in wood processing industry by the creation of price calculation. We would like present advantages and disadvantages of this calculation method in company and to compare this progressive method with classical method of cost calculation

2.Research methodology

Target costing calculation also referred to as target oriented method of costing calculation has its origins in Japan. In 1980rsquo;s it spread to our continent through American daughter companies in Western European countries. In 1990rsquo;s more than 80 % of engineering and electro technical industry companies in Japan used this method of calculation (Tumpach, 2008). Target costing is not just a cost reduction technique or control framework but part of the comprehensive strategic profit management system including value analysis and value engineering (Helms, Ettkin, Baxter amp; Gordon, 2005).

The primary task is not to find out how much a product costs, but how much a product can cost so that it is possible to be sold for a particular market price. Calculation as a pricing tool is in the areas of strong competition therefore slowly losing its significance. Price is determined by the market and it is not possible to offer the product at the market for a higher price. Thus companies have to manufacture products with such costs which can be covered by the final price. Therefore it is important to plan costs not only in the manufacturing stage but at the initial stages of the production performance. Production costs are influenced especially by its characteristics and manufacturing methods.

Majority of performance costs are decided already in pre-manufacturing stages since there are already determined such factors as technological progress and performance characteristics. It is proved that 85 to 90% of costs relating to performance are the result of decision made in pre-manufacturing stages (Foltiacute;novaacute;, et al., 2007). The basic idea of target costing calculation is in setting the limits for maximum allowable costs which should not exceeded by company manufacturing. This limit is untraditionally set on the basis of technical an

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