Target Costing as an Instrument for Cost Optimization and Corporate Profit Growth

The article is devoted to the study of target costing as a strategic tool for cost and profit management in a company. The historical prerequisites for the emergence of the method in Japan in the 1960s, its evolution and modern significance in the context of global competition, digitalization and shortening product life cycles are considered. The classical algorithm of target costing application is presented in detail, including the determination of market price, target profit, calculation of target cost and step-by-step elimination of the «cost gap» with the involvement of cross-functional teams. The author substantiates the need to differentiate approaches to determining the desired profit depending on the type of product. The article identifies three groups of goods — innovative/premium, standard and everyday goods (commodities), — and for each of them priority and reserve methods for calculating target profit are proposed. A summary matrix of recommendations has been formed, allowing to choose the optimal tool depending on the strategic role of the product in the company’s portfolio.