The Target Costing Approach

Essay from the year 2007 in the subject Business economics - Controlling grade: 13 European Business School - International University Schloß Reichartshausen Oestrich-Winkel course: Vertiefung Controlling language: English abstract: Contemporary times are characterized by quick dynamic and continuing changes in theeconomy. Therefore companies have to adapt flexibly and innovatively to thesechanges in order to stay competitive and cope with the increasing pressure of competition.In particular Asian and East-European competitors gain market share by offeringproducts of better quality than in earlier times and for lower costs. Under these conditionscosts represent a fundamental factor for the success of western companies. Accordinglymanagement and employees have to fully exploit the potential that cost managementand reduction measures offer. However costs are not the only buying decisioncriterion. Customers expect products with high quality but for a low or moderate price.Correspondingly companies have to adjust their new product developments and productionsystems to market requirements. This can be achieved by the Target Costingapproach a tool that is applied in more and more companies.Therefore the aim of this essay is to explain the goals and method of Target Costing. Itstarts with giving some background information about Target Costing and its historicaldevelopment. Chapter three describes the goals of Target Costing. Then the TargetCosting process is explained in detail. Finally this essay concludes by discussing thatTarget Costing is an effective cost management tool for developing new products accordingto market requirements.[...]