Empirical Research on Target Costing Performance Due to Supplier Relations

Abstract

This paper investigates how the supplier and paternal manufacturer relations will affect target costing performance, by use of a questionnaire survey for the Japanese companies listed on the Tokyo Stock Exchange. The log-linear model was applied to the data of category variables as factors in the hypothesis. This method will estimate the effects of each variable as well as the combination of categories of various variables.

In this research, we found the following results.

Regardless of the “detail-controlled parts” maker or the “black-box parts” maker, the higher the benefit and risk accompanied are shared by these two parties, the higher the company possesses the information of the parts maker. Further, the higher the company shares benefit and risk in producing the parts with the “detail-controlled parts” maker, the better the target cost of a product is achieved. However, even middle level sharing of the benefit and risk will have positive effect on the target cost reduction performance.

On the other hand, it was found that if the company would hold much information about the “detail-controlled parts” maker, the higher achievement of the target cost of the product is. Conversely, such evidence was not found for the “blackbox parts” maker. Moreover, it was also found that if the company did not hold so much information about the “detail-controlled parts” maker, the target cost of the product would not be achieved well. However, such evidence was not found for the “black-box parts” maker.