Target costing

Statements on Management Accounting
STRATEGIC COST MANAGEMENT

TITLE

Implementing
Target Costing

CREDITS
Implementing Target Costing was approved for issuance as a Statement on Management Accounting by the Management Accounting Committee (MAC) of the Institute of Management Accountants (IMA® IMA
).
extends appreciation to the Society of Management
Accountants of Canada (SMAC) for its collaboration in creating this SMA and to Robert A. Howell, Ph.D., president of Howell Management Corporation, who drafted the manuscript.

IMA thanks the Consortium for Advanced
Manufacturing-International (CAM-I) for their support in the development of this SMA. IMA is also grateful to the members of the Management Accounting
Committee for their contributions to this effort.

Statements on Management Accounting
STRATEGIC COST MANAGEMENT

Implementing Target Costing
TABLE OF CONTENTS
I.
II.
III.
IV.
V.
VI.

Rationale . . . . . . . . . . . . . . . . . . . . . . . 1
Scope . . . . . . . . . . . . . . . . . . . . . . . . . 2
Defining Target Costing . . . . . . . . . . . . . .2
Objectives of Target Costing . . . . . . . . . . .5
The Role of the Management Accountant .6
The Target Costing Process . . . . . . . . . . .8
Developing the Target Cost . . . . . . . . .9
Realizing the Target Cost . . . . . . . . . .13
Monitoring the Target Costing Process 15
Enhancing Target Costing with Kaizen
Costing . . . . . . . . . . . . . . . . . . . . . . .16
Repeating the Target Costing
Process . . . . . . . . . . . . . . . . . . . . . . .16
VII. Target Costing Process Tools . . . . . . . .17
Market Assessment Tools . . . . . . . . .17
Industry and Competitive Analysis . . .18
Reverse Engineering . . . . . . . . . . . . .18
Financial Planning and Analysis . . . . .19
Product Cost Analysis . . . . . . . . . . . .19
Cost Tables . . . . . . . . . . . . . . . . . . .20
Value Engineering . . . . . . . . . . . . . . .21
Quality Function Deployment . .