Early Evidence on the Interactive Effects Involving Product Development Organizations and Target Cost Management

Advances in Management Accounting

ISBN: 978-0-76231-243-6, eISBN: 978-1-84950-367-9

ISSN: 1474-7871

Publication date: 10 December 2005


In this article, we examine the link between product development organization and target cost management. More specifically, we investigate the interactive effects of alternative product development organizations, methods for setting target costs, and alternative decision-making authority in assigning targets. Based on the results of a questionnaire survey of Japanese manufacturers, we intend to provide some early evidence on those interactive effects to stimulate further research in this area of target cost management. We find that organizational efficiency is connected with cost reduction performance in target cost management from the two perspectives: (1) the relationship between the simultaneous involvement of project leaders and functional staff and the use of a particular target cost-setting method, and (2) the correlation of the simultaneous project-function involvement with the level of expected cost reduction performance. No particular product development organization shows any preference for the use of a target cost-setting method. The preference, however, is shown clearly when a particular target cost allocation decision authority is aligned with the use of a target cost-setting method. Companies with higher levels of cost reduction performance (expected or experienced) tend to make project leaders and functional staff get simultaneously involved in target cost allocation decisions.


Lee, C., Lee, J. and Monden, Y. (2005), "Early Evidence on the Interactive Effects Involving Product Development Organizations and Target Cost Management", Epstein, M. and Lee, J. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 14), Emerald Group Publishing Limited, Bingley, pp. 189-209. https://doi.org/10.1016/S1474-7871(05)14009-X

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