The Impact of Target Costing (TC) on Reduction of Manufacturing Costs “Empirical Study”

Abstract

The purpose of this study is to examine the impact of using target costing method on reduction of manufacturing costs in Sudanese Industrial Companies operating in Khartoum State; as well as exploring the extent of adoption of this method by these companies. For this purpose, the researchers distributed (120) questionnaires, whereas (90) of them were retrieved, which amount to 75%. The study used SPSS program to analyze its results through calculating means, standard deviations, Chi-Square, and percentages. The study results indicated that Sudanese Industrial Companies don’t use the target costing method in pricing their products despite the existence of some practical practices for this method. In addition, the adoption of this method will provide adequate information for supervising and reducing industrial costs. Furthermore, achieving the target profit margin require reducing the overall industrial costs. The study concludes that the major reasons behind not using the target costing method can be attributed to the inadequate knowledge about this method and the various merits it possess, the lack of support from the higher management for applying modern techniques in cost management, besides the adoption of traditional costing method in calculating and managing industrial costs by most of the Sudanese Industrial Companies. The study calls for the Sudanese Industrial Companies to use the target costing method because it is a complementary system for other costing systems.