Application of Target Costing and Performance Analysis: Evidence from Indian Automobile Industry

Abstract

The manufacturing companies must keep attention over challenges and for the moment of adopting technology and practices instead of observation of competition amongst competitor companies. To create automobile business successful in India, companies are essential to adopting better cost accounting techniques to minimize costs. Target Costing has been identified as a popular technique to accomplish company’s goals. Target costing consist exclusive approach to decide target price for the product and services. Target Costing ensure that new product price would be competitive in the market with substantial quality of products. This research investigates the application procedure of Target Costing (TC) in Automobile companies in India. This study employed Target Costing as a dependent variable and Profitability; Growth; Net Tangibility Assets (NTA); EPS and Firm Size as independent variables. The study adopted convenience sample of top ten automobile companies listed on BSE of India and panel data has covered from 2014-15 to 2018-19 financial years. The results determine the target costing impact on profitability had reported by Pearson’s correlation result shown a negative relationship. Target costing impact on Return on sales examined by simple regression analysis and revealed that there is positive correlation. Finally, Target costing impact on financial performance examined by multiple regression results revealed that there is positive correlation with Revenue from Operation; Profitability; Return on Sales (ROS) and Growth, while negative correlation revealed by Margin from Operation; ROA; Net Tangibility Assets(NTA); EPS and Firm Size.