Formation of production cost by the methods of “Target costing” and “Kaizen costing” and their impact on the enterprise efficiency

Authors

DOI:

https://doi.org/10.15587/2706-5448.2025.323949

Keywords:

production costs, prime cost, kaizen costing, target costing, product market price, industrial enterprises

Abstract

The object of this research is the process of formation of costs of enterprises for the production and sale of industrial products. The need for such a study is determined by the use of outdated methods of forming the cost of production at Ukrainian industrial enterprises, which are based on the actual costs of the enterprise. It is proved that the existing provisions of direct costing do not reproduce the provisions of the market pricing mechanism, since the market price is focused not on actual costs, but on the needs and preferences of consumers of products. A detailed study of the existing methods of forming the cost of production was carried out, among which special attention was paid to modern methods of target costing and kaizen costing, developed and widely tested by economists of Japanese enterprises.

The main advantages of target costing and kaizen costing systems when they are used in the conditions of the Ukrainian economy are studied and substantiated. The systems proposed for use provide for putting in the first place not the actual costs, but the market price of the product, and the costs are formed taking into account the desired level of profit for the enterprise. This approach involves the integral (complex) use of target costing and kaizen costing. It has been proven that the combination of these two systems allows to create a continuous cycle of production cost management at all stages of the product life cycle. Target costing provides strategic cost control during the product design phase, while kaizen costing supports and increases efficiency during the production and operation phase. The combination of targeted costing and kaizen costing provides a significant increase in the efficiency of industrial enterprises, is an effective way to achieve strategic and operational goals, increase the competitiveness and sustainable development of industrial enterprises. This is achieved due to the complementarity of these systems at different stages of the product life cycle.

Author Biographies

Petro Pererva, National Technical University “Kharkiv Polytechnic Institute”

Doctor of Economic Sciences, Professor

Department of Business Economics and International Economic Relations

Olena Chernyshenko, National Technical University “Kharkiv Polytechnic Institute”

PhD Student

Department of Business Economics and International Economic Relations

Vladyslav Ponomarov, National Technical University “Kharkiv Polytechnic Institute”

PhD Student

Department of Business Economics and International Economic Relations

Tetiana Kobielieva, National Technical University “Kharkiv Polytechnic Institute”

Doctor of Economic Sciences, Professor

Department of Business Economics and International Economic Relations

Somosi M. Veresne, University of Miskolc

Doctor of Economic Sciences, Professor, Dean of Faculty of Economics

Szabolcs Nagy, University of Miskolc

PhD, Associate Professor

Institute of Marketing and Tourism

Robertas Keršys, Kaunas University of Technology

PhD, Associate Professor

Department of Transport Engineering

Peter Reichling, Otto-von-Guericke University Magdeburg

Doctor of Economics, Professor, Head of Department

Department of Finance and Banking

Nadiya Tkachova, LLC “SAUBER-MANICURE”

PhD, Associate Professor, Director

Maksym Tkachov, LLC “SAUBER-MANICURE”

PhD, Associate Professor, Director of Department

Department of Economics, Finance and Law

References

  1. Abate, Y. A., Mengesha, T. (2020). Factors Affecting the Successful Implementation of Kaizen in Ethiopia. The International Journal of Business & Management, 8 (1), 50–56. https://doi.org/10.24940/theijbm/2020/v8/i1/bm2001-019
  2. Biadacz, R. (2024). Application of Kaizen and Kaizen Costing in SMEs. Production Engineering Archives, 30 (1), 17–35. https://doi.org/10.30657/pea.2024.30.2
  3. Pererva, P., Ievsieiev, A., Maslak, M., Tkachov, M., Tkachova, N. (2024). Formation of intellectual property commercialization strategies. Eastern-European Journal of Enterprise Technologies, 1 (13 (127)), 80–91. https://doi.org/10.15587/1729-4061.2024.296836
  4. Pererva, P., Nazarenko, S., Maistro, R., Danko, T., Doronina, M., Sokolova, L. (2021). The formation of economic and marketing prospects for the development of the market of information services. Eastern-European Journal of Enterprise Technologies, 6 (13 (114)), 6–16. https://doi.org/10.15587/1729-4061.2021.245251
  5. Alosani, M. S., Al-Dhaafri, H. S. (2022). The integrated effect of Kaizen and innovation culture on the police performance: an empirical investigation. American Journal of Business, 37 (4), 153–172. https://doi.org/10.1108/ajb-02-2022-0024
  6. Kaur, M. (2014). Kaizen Costing: A Catalyst for Change and Continuous Cost Improvement. GE–International Journal of Management Research, 2 (1), 1–16. Available at: https://www.academia.edu/42193192
  7. Ramezani, A., Razmeh, A. (2014). Kaizen and Kaizen Costing. Academic Journal of Research in Business and Accounting, 2, 43–52.
  8. Ariovaldo, G., Flavio, P., Gabriel, R. (2005). Target and kaizen costing in construction. 13th Annual Conference of the International Group for Lean Construction. Sydney. Available at: https://www.researchgate.net/publication/277948788_
  9. Azimisani, A. (2021). Target-and-kaizen-costing. URL: https://www.researchgate.net/publication/353298584
  10. Pererva, P., Kobielieva, T., Glisnuza, M., Ievsieieva, O., Doronina, M., Kosenko, A. (2024). Economic and Legal Problems of the Development of the Ukrainian Small Aviation Market and Ways to Solve Them. Transport Means 2024. Proceedings of the 28th International Scientific Conference. Kaunas: KTU, 787–792. https://doi.org/10.5755/e01.2351-7034.2024.p787-792
  11. Gorodilov, M. A., Fetisova, O. A. (2015). Goal Costing-Cost of Products (Works, Services) Calculation Methods Based on Systems Target Costing and Kaizen Costing in Sphere of Information Technologies. International Business Management, 9 (5), 980–986. Available at: https://makhillpublications.co/view-article.php?doi=ibm.2015.980.986
  12. Kachalay, V. V. (2013). Kaizen Costing: Experience and Prospects of Implementation at Industrial Enterprises of Ukraine. Biznes Inform, 8, 273–277. Available at: https://www.business-inform.net/export_pdf/business-inform-2013-8_0-pages-273_277.pdf
  13. Spasić, K., Novićević Čečević, B., Antić, L. (2024). The impact of digitization of the cost accounting system on organizational efficiency and effectiveness in the healthcare sector of the Republic of Serbia. BizInfo Blace, 15 (2), 39–47. https://doi.org/10.5937/bizinfo2402039s
  14. Pererva, P., Maslak, M. (2022). Commercialization of intellectual property objects in industrial enterprises. Problems and Perspectives in Management, 20 (3), 465–477. https://doi.org/10.21511/ppm.20(3).2022.37
  15. Masadeh, A., Jrairah, T., Almasria, N. (2023). The Impact of Applying the Target Cost Approach on Products’ Structure (Products Pricing, Development and Quality). International Journal of Professional Business Review, 8 (6), e02086. https://doi.org/10.26668/businessreview/2023.v8i6.2086
  16. Maslak, M., Pererva, P. (2023). Formation of economic and legal measures for the development of the market of intellectual property objects. Eastern-European Journal of Enterprise Technologies, 1 (13 (121)), 113–124. https://doi.org/10.15587/1729-4061.2023.273850
  17. Narsaiah, N. (2020). Application of Target Costing and Performance Analysis: Evidence from Indian Automobile Industry. Journal of Accounting Finance and Auditing Studies (JAFAS), 6 (3), 148–174. https://doi.org/10.32602/jafas.2020.022
  18. Pererva, P., Besprozvannykh, O., Tiutlikova, V., Kovalova, V., Kudina, O., Dorokhov, O. (2019). Improvement of the Method for Selecting Innovation Projects on the Platform of Innovative Supermarket. TEM Journal, 454–461. https://doi.org/10.18421/tem82-19
  19. Khoruzhy, L. I., Katkov, Y. N., Romanova, A. A. (2020). Use of target-costing and kaizen-costing to ensure effective cost management in interorganizational relations of agribusiness organizations. Buhuchet v Sel’skom Hozjajstve (Accounting in Agriculture), 11, 24–34. https://doi.org/10.33920/sel-11-2011-03
  20. Pererva, P., Kobieliev, V., Maslak, M., Maslak, O., Kobielieva, A. (2022). Intellectual and Innovative Directions of Improving the Market Characteristics of Asynchronous Electric Motors. 2022 IEEE 4th International Conference on Modern Electrical and Energy System (MEES), 1–6. https://doi.org/10.1109/mees58014.2022.10005691
  21. Gabriel, R., Ariovaldo, G. (2006). Target and kaizen costing implementation in construction. 14th Annual Conference of the International Group for Lean Construction. Santiago. Available at: https://www.researchgate.net/publication/237569619
  22. Aqeel, S. M. (2021). The role of target costing in restructuring production costs to reach a competitive price: A case study in one of the Iraqi factories. Journal of Economics, Entrepreneurship and Law, 11 (1), 81–94. https://doi.org/10.18334/epp.11.1.111509
  23. Brown, D. A., Booth, P., Giacobbe, F. (2004). Technological and organizational influences on the adoption of activity‐based costing in Australia. Accounting & Finance, 44 (3), 329–356. https://doi.org/10.1111/j.1467-629x.2004.00118.x
  24. Omotayo, T., Kulatunga, U., Awuzie, B. (2022). Modern Methods of Cost Control. Continuous Cost Improvement in Construction, 70–84. https://doi.org/10.1201/9781003176077-6
  25. Omotayo, T., Kulatunga, U., Awuzie, B. (2022). Construction Cost Management Methods. Continuous Cost Improvement in Construction, 42–56. https://doi.org/10.1201/9781003176077-4
  26. Terzi, A. (2021). A discussion on the problems and multi-dimensional reasons in target costing applications. Muhasebe ve Vergi Uygulamaları Dergisi, 14 (1), 363–396. https://doi.org/10.29067/muvu.643749
  27. Maslak, M., Yakovenko, Y., Maslak, O., Pererva, P., Grishko, N. (2022). Problems of Intellectual Property in the Information Economy Through the Prism of Artificial Intelligence as a Dual-Purpose Technology. 2022 IEEE 4th International Conference on Modern Electrical and Energy System (MEES). Kremenchuk, 1–5. https://doi.org/10.1109/mees58014.2022.10005671
  28. Pererva, P., Maslak, M., Nagy, S., Kosenko, O., Kobielieva, T.; Semenov, A., Yepifanova, I., Kajanová, J. (Eds.) (2024). Economic Assessment of Outsourcing of Intellectual and Information Technologies. Data-Centric Business and Applications. Cham: Springer, 147–186. https://doi.org/10.1007/978-3-031-54012-7_7
  29. Singh, S., Kumar, M. (2014). Integration of Quality Function Deployment and Target Costing. Intern. Journal of Computer Applications, 16–19. Available at: https://www.researchgate.net/publication/304395289
  30. Rattray, C. J., Lord, B. R., Shanahan, Y. P. (2007). Target costing in New Zealand manufacturing firms. Pacific Accounting Review, 19 (1), 68–83. https://doi.org/10.1108/01140580710754656
  31. Egbuhuzor, C., Rumuolumeni, P. (2019). Target costing and value engineering. Available at: https://www.researchgate.net/publication/335224106_Target_costing_and_value_engineering
  32. Sani, A. A. (2021). Target and Kaizen Costing. Available at: https://www.researchgate.net/publication/353298584
  33. Pererva, P., Marchuk, L., Novik, I., Dolyna, I., Suslikov, S., Maistro, R. (2024). Study of the Theoretical and Methodological Essence of Transport Technologies. Transport Means 2024. Proceedings of the 28th International Scientific Conference. Kaunas: KTU, 137–142. https://doi.org/10.5755/e01.2351-7034.2024.p137-142
  34. Arya, A. K., Choudhary, S. (2015). Assessing the application of Kaizen principles in Indian small-scale industry. International Journal of Lean Six Sigma, 6 (4), 369–396. https://doi.org/10.1108/ijlss-11-2014-0033
  35. Kern, A., Soares, A., Formoso, C. (2006). Introducing Target Costing in Cost Planning and Control: a case study in a Brazilian Construction Firm. Construction in Developing Economies: New Issues and Challenges. Available at: https://www.researchgate.net/publication/335025726
  36. Lueg, R. (2020). Target costin in electronics manufacturing – A case study. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3864422
  37. Asiedu, Y., Gu, P. (1998). Product life cycle cost analysis: State of the art review. International Journal of Production Research, 36 (4), 883–908. https://doi.org/10.1080/002075498193444
  38. Dhillon, B. S. (2009). Life Cycle Costing Fundamentals. CRC Press, 224. https://doi.org/10.1201/9781439816899
  39. Kádárová, J., Kobulnický, J., Teplicka, K. (2015). Product Life Cycle Costing. Applied Mechanics and Materials, 816, 547–554. https://doi.org/10.4028/www.scientific.net/amm.816.547
Formation of production cost by the methods of “target costing” and “kaizen costing” and their impact on the enterprise efficiency

Downloads

Published

2025-02-27

How to Cite

Pererva, P., Chernyshenko, O., Ponomarov, V., Kobielieva, T., Veresne, S. M., Nagy, S., Keršys, R., Reichling, P., Tkachova, N., & Tkachov, M. (2025). Formation of production cost by the methods of “Target costing” and “Kaizen costing” and their impact on the enterprise efficiency. Technology Audit and Production Reserves, 1(4(81), 20–27. https://doi.org/10.15587/2706-5448.2025.323949

Issue

Vol. 1 No. 4(81) (2025): Economics of enterprises. Macroeconomics

Section

Economics and Enterprise Management

License

Copyright (c) 2025 Petro Pererva, Olena Chernyshenko, Vladyslav Ponomarov, Tetiana Kobielieva, Somosi M. Veresne, Szabolcs Nagy, Robertas Keršys, Peter Reichling, Nadiya Tkachova, Maksym Tkachov

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

The consolidation and conditions for the transfer of copyright (identification of authorship) is carried out in the License Agreement. In particular, the authors reserve the right to the authorship of their manuscript and transfer the first publication of this work to the journal under the terms of the Creative Commons CC BY license. At the same time, they have the right to conclude on their own additional agreements concerning the non-exclusive distribution of the work in the form in which it was published by this journal, but provided that the link to the first publication of the article in this journal is preserved.