Target costing process: A case study in a machinery manufacturing firm located in Antalya Organized Industrial Zone

Today in the global market, most companies are operating in an environment that has witnessed the shortening of product life cycle due to rapid technological innovations, rapid exchange rate of fluctuation, changing customers? demands and severe market competition in terms of quality and price, etc. Under such radical internal and external environment changes, contemporary cost techniques and cost plus pricing strategies are no longer useful. Target costing as a disciplined process for determining and realizing a total cost at which a proposed product with specified functionality must be produced to generate the desired profitability at its anticipated selling price in the future. Also target costing is a strategic planning tool which serves the products and its components to define the cost reduction and product improvement regions with a holistic view. Target costing uses various techniques to set and achieve the goals based on the strategic plans of the company. The study uses Quality Function Deployment and Activity Based Costing which have been discussed as the supporting systems during the target costing process in order to determine the cost reduction regions of the actual model which will guide the cost of the new model for an industrial cooling machine producer firm in the machine industry which is also one of the most applied industries of target costing worldwide. To prioritize the customer preferences in Quality Function Deployment, a survey based on The Analytic Hierarchy Process have been applied to service and kitchen personnel working in four star and five star hotels established in Antalya Region. The survey results have been analyzed by Expert Choice 2000 computer software program and used in Quality Function Deployment system. The study determines the cost reduction regions by considering customer preferences and the perception of competitors? products by consumers. The result of the study suggests that a well established cost information and market research may serve competitive information to the companies for assisting them establishing their strategic plans.