USING THE TARGET COSTING METHOD IN NEW PRODUCT DEVELOPMENT: AN APPLICATION IN PLASTIC PIPES PRODUCTION

Abstract

As traditional cost management becomes inadequate, up to date cost management methods are emerging. Target costs, one of the contemporary cost management programs, aim to search for cost structures that are suitable for the competitive markets while keeping the margins at a sustainable level.
With technological advancements, the overall quality of life has increased tremendously. People all over the world now demand to live in environments that are comfortable and stress-free. This pushes prestigious construction companies to choose silent pipes for their infrastructures. The pipe manufacturing company in which this research is conducted at stands out as a high-quality pipe supplier, and thus is aiming to manufacture silent pipes to satisfy construction company's needs. Just manufacturing products according to customers need and omitting the needs of the management would end up undesired results, thus cost management techniques were used. This study aims to demonstrate the steps of a real production scenario. The properties of silent pipes are stated and sensitive time studies are conducted to identify working hours needed. Standard production times are derived by taking average observation values from the time studies and are normalized by adding the tolerances on top. To calculate the total production cost, work and effort required from assisting production departments are also accounted for and added. Finally, the target prices were determined according to the target costs and the market conditions.