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2022-12-07
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Copyright (c) 2022 Chude, Daniel Izuchukwu , Chude, Nkiru Patricia
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The Effect Of Using The Target Cost On Firm Profitability In Manufacturing Firms.
Chude, Daniel Izuchukwu
Department of Accountancy, Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus, P.M.B 6059 Awka, Anambra State, Nigeria.
Chude, Nkiru Patricia
Department of Banking And Finance, Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus, P.M.B 6059 Awka, Anambra State, Nigeria.
Keywords: Target Costing, Profitability, Life-cycle Cost, Just in Time, Cost Drivers, Manufacturing Firms
Abstract
The objective of this study is to examine the effect of target costing on firm profitability of manufacturing firms in Anambra State. The study specifically examined how manufacturing businesses’ target costing systems allocate costs based on cost drivers and resource centres; and, the extent to which market competition affects the selected manufacturing firms' product life-cycle cost established by targeting costing. A final, viable sample of 100 questionnaires from the study's survey research design was collected and used for additional analysis. One-way ANOVA and descriptive statistics were used to analyze the primary data. The findings revealed that there was no significant difference between the respondents' mean ratings for hypothesis one, i.e., the design of the costing system of selected manufacturing firms in cost allocation based on cost drivers and resource centres does not differ significantly; secondly, there was no significant difference between the respondents' mean ratings for hypothesis two; in other words, the effect of market competition on selected manufacturing firms' product life-cycle costs established by targeting costing does not differ significantly. Based on this, the authors suggest two things: first, the application of the Just-in-Time (JIT) philosophy, as it would reduce waste and product cost; and second, the regular modification of products to always meet customer requirements and conform to specifications as far as quality and functionality at a low cost.