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Target costing in New Zealand
manufacturing firms
Caleb J. Rattray
Deloitte Touche Tohmatsu, Christchurch, New Zealand


Beverley R. Lord and Yvonne P. Shanahan
University of Canterbury, Christchurch, New Zealand
Purpose – As there is scant research outside Japan on the implementation of target costing, the
purpose of this research is to examine target costing practices in New Zealand.
Design/methodology/approach – A mail questionnaire survey was sent to 80 New Zealand
manufacturers, with a response rate of 31 (39 per cent).
Findings – A total of 12 of the 31 respondents use target costing. Findings on the use of target
costing that contrast with or add to prior studies include the following: target costing is being applied
to existing products; the manufacturing department is highly involved in target costing; the
involvement of suppliers in target costing is relatively low; considerable adjustments are made to the
calculated allowable costs, especially in order to assist sales of future products and to ensure the
achievement of target costs; and higher achievement of target costs is associated with higher firm
performance. The goals of target costing and the departments involved in the practice were similar to
those in prior studies.
Research limitations/implications – The sample size and minimal number of firms actually
using target costing has made it difficult to obtain statistically significant results. The survey method
prevents follow-up questions and clarification of ambiguities. Single measures of performance and
strategy were used.
Originality/value – This survey provides academic researchers and teachers and firms
implementing or using target costing systems with a greater understanding of how target costing
is being used by New Zealand manufacturers, as well as adding to the scant...

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