Implementation of Target Costing Method in A Company Producing Denim Fabric

The rise of management accounting at the beginning of the twentieth century is interpreted as an important event for achieving better business management. Management accounting has presented many techniques that better serve the increasingly complex needs of businesses over time. In addition, the inadequacy of traditional cost methods in calculating goods and services has played an important role in the development of modern costing methods. Target costing is one of the most effective cost methods developed in this new century. As a useful and efficient management tool, this method has a comprehensive approach to manage costs, reduce the main costs of products at the initial stage of product planning and design, and make long-term profits.Target costing was developed from Japanese cost management in the 1960s. Since then, the use of target costing by companies has become much more common. Simply, target costing determines the target price and target profit for future products, and the difference between them gives the target cost. Where target cost cannot be achieved, value engineering is used to reduce costs. While the product is still in the design phase, what its future cost should be is planned and the costs can be controlled in line with consumer demands.The aim of this study is to investigate the applicability of target costing method in a textile company producing denim fabric. In the study, case study was preferred as a research method in order to analyze the data in detail. In this direction, first a descriptive case study was conducted in the company and within this scope, the existing cost system and production workflow of the company were examined. The traditional cost-plus pricing method is currently used in the company and there has been no previous study on target costing. Afterwards, an exploratory case study was conducted and on-site investigations were made and face-to-face meetings were held with accounting, production, sales and marketing managers, and target costing method was applied in the company. As a result of the research, it was determined which costs should be controlled in the production process and which costs could be reduced by applying the target costing method in the company. In addition, some recommendations were made to the company on which activities were over-invested or in which activities should be improved in line with the findings of the study and customer expectations.