Abstract

During the last two decades, with increasing competition in highly changing business environment, literature has cautioned against the efficiency and capability of traditional management accounting techniques in providing sufficient information needed for decision making. In coping with continuing changes in business environment and increasing pressure of competition, cost and management accounting techniques have been changed and new techniques have been developed, especially in the last two decades. This is to enable organizations to stay competitive by producing better quality products at lower costs. As Target Costing (TC) has been innovatively adopted to achieve this objective by Japanese companies in the 1960s, this paper attempts to show the historical development of TC. Premised on the review of forty (42) refereed journal articles published in various accounting journals during the periods of 1984 to 2013, this paper shows how, over times, the TC practices have undergone a three-phase evolution from cost reduction and control to cost and profit management and to quality and functionality improvement. Specifically, the paper examines the evolutionary facet of TC by using the 1998 IFAC-based management accounting evolution framework.

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