DOI: https://doi.org/10.36719/2663-4619/114/115-126
Lachin Kamilov
Azerbaijan State University of Economics
Master student
https://orcid.org/0009-0001-4867-0623
kamilovlachin@gmail.com
Application of the Cost Method Based on Target Indicatior In
Justifying Business Decisions
Abstract
Target costing is a method that helps a company achieve the desired profit by determining the maximum allowable cost for producing a product or delivering a service. The method starts with analyzing the market price, establishing an acceptable price for the target segment, which serves as the basis for cost calculations. In the early stages of product development, specialists from marketing, production, and finance are involved to collaboratively optimize costs. In this process, concepts such as "marketing positioning," "SWOT analysis," "competitive environment analysis," are used, as well as the concepts of "lifecycle cost" and "financial efficiency." This approach helps control expenses at all stages of the product lifecycle, maintain the required profitability, and make sound business decisions aimed at optimizing processes and improving technologies. However, the successful application of the method requires accurately forecasting market conditions, analyzing key performance indicators (KPIs), and ensuring active participation from all stakeholders, which can be challenging in conditions of high uncertainty. The target costing process includes several stages: market analysis to determine the target price, profit calculation, establishing allowable cost, product optimization, and cost control. This method enhances competitiveness, improves resource management, but requires detailed analysis, which increases expenses.
Keywords: Cost method based on target indicator, profit, marketing, expenses, product