Target Costing Essay Example | Topics and Well Written Essays - 1000 words

cigarette Costing - Essay ExampleTarget approach in the initial stage allows business to get over the design, specification and come apartment technique to control the overall embody. TC provides business with new(prenominal) than basic existing processes. Chen and Chung (2002) discussed the service that TC lends by enabling manager to indentify the fraudulent as well as corruption practices in involved departments. Swenson, Ansari, Bell and Kim (2003) identified most important benefit of the TC. Swenson, Ansari, Bell and Kim (2003) accede that TC system is originally a grocery driven system and therefore, forces business to follow market trends in order to control cost instead of relying only on internally developed metrics. Hence, results in market and customer focused processes. DEMERITS Davila and Wouters (2004) criticized the target cost for being extensively detail oriented resulting in bureaucratic procedures and hence consuming time at length. TC to be successfully implemented requires full(a) supply chain components to play respective part business employing procedure in isolation cannot acquire the due benefits. In case of excessive cost control measures without coordination, TC can result in contradictions among business functions pointing fingers upon each other functions. Jackson and Lapsley (2003) discussed that TC to be implemented successfully require businesses to develop coordinated system with other techniques that have been limited employed in businesses reducing the level of benefit. specialization OF TARGET COSTING FROM OTHER CONCEPTS All costing techniques are designed to get maximum benefit to business however, differences in focal attention substantially differentiate each technique with other. The basic difference between TC and other costing methods is that TC puts emphasis in designing stage whereas other methods trenches cost reduction from entire production process (Garrison, Noreen, & Brewer, 2003). Given below is the discussion of point of differences of TC with other costing techniques FULL COSTING/ABSORPTION COSTING Absorption costing traditionally uses cost ascertainment for the product by simply including both restore and variable cost and charges entire cost to production. The set of the product is determined base on accounting the production cost in total. In stubborn to this, in target costing system the price of the product is signaled by the market. Manufacturer of the products nets the price fixed by market and develops plan to produce the product within the left out portion of prices. This leads to cost reduction in the production plan and design unlike other costing systems that bargain cost in operational constituents of the product. Hence, the difference between the two systems lies in former deciding price based on cost whereas in latter system price and required profit margin determines the costing decisions (Garrison, Noreen, & Brewer, 2003). VARIABLE COSTING In variable co sting techniques, cost of manufacturing includes only those cost components that vary in the given period for the