Feasibility of target costing system in Kurdistan tractor manufacturing company.

Transcription

1 International Research Journal of Applied and Basic Sciences 2015 Available online at ISSN X / Vol, 9 (10): Science Explorer Publications Feasibility of target costing system in Kurdistan tractor manufacturing company. Mehrdad Ghanbari 1, Bakhtiar Asaadi 2, Saeed Mirzaei 3 1. Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran 2. Department of Accounting, Kermanshah science and Research Branch, Islamic Azad University, Kermanshah,Iran 3 Department of Accounting, Kermanshah science and Research Branch, Islamic Azad University, Kermanshah,Iran. Corresponding Author bakhtiarassadi@gmail.com ABSTRACT: Management and its related processes, has determinant role in continuity of activity and permanence of firms in the competition and precipitate business environment. Due to paradigm changing over economic environment, relative management approaches,especially in the strategic management and management of accounting domain aren't responsive to new conditions and using modern models and management approaches for facing with challenges are necessary and inevitable. Due to this point those todays, competition of firms in many industries become worldwide procedure, previous management methods don't have usefulness and naturally, the tools that development and acceptable function measured with them, they have been come out for using. In the present environment that competition is inherent and getting success is the aim of managers and economic agencies, should review old systems and establish a new management system. Traditional industrial and management accounting aren't need of managers and using of its information due to misleading in lack of true making decision of managers. Because of this, introduce and establish a new system that follows deceasing of final price in earning the excepted profit by focusing on designing of product and finally earning of maximum quality for attraction of customer satisfaction and this system isn't something except costing system. This system as tool for accessing the long term growth via acquiring the customer satisfaction. The firms that use this system,try to impel their attempts proportion with market direction and by this way, they can compete with other competitors in the market and at the same time receive the reward from market for this alignment.this article,investigates the possibility of purpose costing system performance in the tractor manufacturing of Kurdistan and along with this, design six hypotheses. Statistical method that used in this study is one sample T-test by using Spss software. The results from this study show that the performance possibility of this system exists in tractor manufacturing of Kurdistan. Key words: target costing, value engineering, the purpose final price, the purpose sale price, and chain of value. Literature review Target costing includes strategic process of expense for decreasing the sum of expenses (costs) in the designing and planning of product. The target costing is the organizational and regular approach for determining of production cost that one product in it, should produce with certain level of quality and output with predictable sale price for making the certain level of production profitability. The existing difference between target costing and traditional costing in the planning of profit and cost, is reflective of discrepancy of theoretical bases of each one. Those bases origin from theory of systems that arising from perspective about management and control. Traditional approach of final value as well as percent of profit origin from the attitude of closed system. This attitude is ignored the reciprocal acting between organization and its environment and investigation of many variables in describing the behavior of system and after observing the real results,take the action for reforming activities that try to accordance of them with predetermining standards. In contrast, costing system based on purpose, is the open system that this approach pay attention to the importance of agreeability of organization with its environment. In describing of system behavior, the complex collection of reciprocal effects is considered. Reformatory activities perform before the results and necessity of presenting the comment about better standards are felled. It should be considered that theory of closed system designs for predictability and constant environment. And in this way, they aren't suitable for unpredictability

2 dynamic today s changing and business environment. In the table 1, four main differences between the purpose costing and traditional management in theoretical bases are summarized. Table 1. comparison of theoretical bases of target costing and traditional management of cost. The conception of systems theory Traditional management of cost ( closed systems) Costing based on purpose(open systems) Related with external environment Ignore the external environment.this system pay attention to internal usefulness criteria. In reciprocal effect with environment, is ability for needs. of customers and competition conditions The number of variables that pay attention to them The shape of regulations The purpose of exert regulations with control Don't pay attention to Reciprocal function with external effect on costing system. After proving the cost, via information related to deviations, reform of mistakes is performed. Keeping the amount of expenses (costs) in limitation that it is determined by standards with budget. Consider many complex communications between functions and all over the chain of value Before the proving the cost, via predicting and designing of product before production, reforms are performed. Reform (improvement) of cost for both customer and producer is continued during the product. Target costing is one strong procedural tool that at the same time, organization can find three dimensions of quality cost and time and it controls cost before the occurrence. Also, it determines costing based on cultural purpose that it gives the value to customer. It organizes the alongside output and it clears the information. Target costing have various benefits as follow: Due to that all organizational people from up to down, feel commitment to innovation in product and production. It helps the organization for making the competition future with marketing management and designing and producing of products that they have appropriate price for acquiring success in the market. It uses the control of management system for improving and supporting of production procedures.also, it recognizes the existing opportunities in the market and it provides accessing to the best value and not just the lowest expense. As whole, exists three main parts for expense that shapes target costing. The first part related to conditions of market that as the market motive, is determined the figurative costing level and in fact it is electiveness of competition pressures that considered firm is faced to it. Costing based on purpose, is the regular process that the start point is market conditions and pressures that market and needs of customer impose on product price.this needs in the shape of permissible price for new product transfer to product designers. In the second part of process, expense based on purpose focuses on product level and product designer try to via considering three characteristic of survival triangle, determine the final value of product level. The creativity of product designers play important role in this stage. In continuing of process, it is third part that final value of purpose, analyzes the product level to pieces level. The principles of target costing There are six main principles in target costing that it is necessary to pay attention in the profit management and strategic final value. This principles show the thinking about cost management and it is completely different from the attitude about traditional cost management in planning of profit. This principle include: costing of market price The extremity of competition shows the amount of attention that it should considers the economic unit in costing based on purpose. Profit and cost of product programs are determined via market prices and continuously by transferring of pressure to product designers and providers of pieces, the probability of producing new product in survival region is increased. In the target costing, for getting the purposes of cost, considered profit is deducted from competition market price. customer center or focusing on customer In all over the target costing process, always pay attentions to the view of customer and his/her requests related to quality, price and time is exerted at the same time in product and decisions about constructing and analyzing of expenses(costs). Pay attention to customer need and considering the firm statue in the competition view are necessary. It can t acquire Target costing with sacrificing the considered characteristics of customers, weakening worker or reliability of product or delay of product in market. 1669

3 focusing on designing and production processes In the purpose costing, products designing and basic management processes are considered. In the way that, spend more time in designing and with omission of time consuming and expensive stages,the essential time for entering the product to market is decreased. In the traditional management of cost, for decreasing of costs, focus on saving origin from increasing of product volume, spreading curve, decreasing of useless materials and improvement of output. reciprocal functions of units In target costing, the members of operational and production are designing and production line engineering, sale and marketing, preparations unit, industrial accounting circle, supportive service circle and it uses people outside the organization include providers of sections, customers, sellers, deliverers, providers of services and first material providers. life cycle of product In costing based on purpose, pay attention to related costs of one product include buying price, operation costs, protection costs and repairs and deliver prices and the purpose is increasing the costs of life cycle of product for consumer and producer. value of chain All element of chain, include pieces providers, sellers, deliverers and providers of service in the target costing are considered. Target costing performs the attempts related to decreasing of expenses (costs) via making the cooperation relationship with people outside of organization in all over the chain of value. Costing system based on purpose designs on the basis of long term and reciprocal of producers and other elements of chain of value By literature review, distinguished that in spite of feeling the necessities of using target costing for decreasing and control of expenses of new product, but because of some reasons include lack of competition in the inside automobile market, lack of attention to needs of customers in the designing stage, lack of enough recognition of managers to this costing method and lack of doing duties interferential for performing and administering of this technic, more study and research in this field is needed. The purpose of study The purpose of this study is that an exact way determines for determining of final value of produced products that it can determine the price of produce products truly and it provides the fairness of produced products price of tractor manufacturing company. tractor manufacturing company of Kurdistan by using costing system based on purpose can has more profitability and acts more actively in the new competition market and be constant. Because of this reasons, doing researches in this field can effective help in the improving of management accounting system in tractor manufacturing company. Therefore the purpose of study can be as follow: Introducing and presenting of costing technic output based on purpose as useful tool for entering the world business organization. Investigation and recognition of effective elements on performing of costing process based on purpose Recognition of favorable and unfavorable conditions for using the costing technic based on purpose Determination the importance of recognition effective elements on different level of costing technic based on purpose. For investigation the possibility of establishment of system in company and also accessing to above purposes, first the two level research method is used that include literature review and providing and sending the questionnaires. And then by using analyzing from the questionnaires, the results of research are determined. In the continuing, study hypothesizes, research method, data collection method, data analyzing, results of research with tables, graphs and recommendations is presented. It expects that the results of research provide favorable field for establishment and recognition of target costing. Statistical sample and society The definition of statistical society of this research are financial, business and technical, engineering managers and bosses and staff of production parts tractor manufacturing of Kurdistan For estimating the amount of sample, estimating sample table or the amount of sample from mother society (Morgan table) is used.there for from 221 staff tractor manufacturing of Kurdistan, (statistical society) based on Morgan table 138 as the sample are chose. 1670

4 Sample group The amount of mother society Table 2. groups numbers percentage managers 2 1 experts Production staff and workers sum Table3. groups numbers Percentage managers 2 1 experts Production staff and workers sum Hypotheses and research questions Due to presented description and the subject of research, the hypotheses of research as below: There is the relation between profit management and continuance of activity of tractor manufacturing company of Kurdistan Acquiring the customer satisfaction effects continuance of activity of tractor manufacturing company of Kurdistan. There is the relation between products designing and t continuance of activity of tractor manufacturing company of Kurdistan. There is the relation between the way of relationship with providers of materials and pieces and continuance of activity of tractor manufacturing company of Kurdistan. There is the relation between cost management and resources development in the tractor manufacturing company of Kurdistan. There is the relation between management of production units o tractor manufacturing company of Kurdistan and making the suitable organizational structure for supporting and protecting of costing technic based on purpose. RESEARCH METHOD In this research by using library method, theoretical bases and related with establishment of costing method based on purpose in the production firms are collected and determined and also due to present statue, the politics and codified regulations of tractor manufacturing company of Kurdistan, the conditions for making costing method based on purpose are analyzed and investigated and by using case study, meanwhile arrangement and presenting of questionnaires to managers, staff and experts of technical,engineering and financial parts of tractor manufacturing company of Kurdistan about conceptions and assumption of costing system based on purpose to recognition of probable limitations and challenges about establishment of costing system based on purpose is performed after analyzing of them by using statistical method of one sample T-test and Spss software,the recommendations for elimination of probable obstacles is suggested. In the present study cronbach s alpha used for validity of questionnaire, in this research for testing the amount of validity, primarily sample is delivered between 15 people from different statistical group and the results tested by cronbach s alpha method, that because of this,the amount of validity is determined equal 83%. Because the amount of cronbach s alpha is more than 70%,therefor, the questionnaire has adequate reliability and validity. The result of hypotheses testing This research had 6 hypotheses that it investigated the target costing in the tractor manufacturing of Kurdistan. All of the hypotheses put in the 99 percent of assurance level that accounting summary presented in the table 4 and table

5 Table 4. the result of testing the hypotheses of research by using the one group comparison of mean test Variables of study Observed mean Statistic of T Degree Level Difference Profit management 4/ / /000 1/00725 Customer satisfaction 4/ / /000 1/59348 Products designing 3/ / / The way of relation with 3/ / / producers Expense management 3/ / / Management of production units 4/ / /000 1/91546 Table 5. result of testing the hypotheses of research by using the one group comparison of mean test comparison the mean of one variable The number of hypothesis Null hypothesis Research hypothesis Result of test about hypothesis Mean 3 Mean 3 First Reject the null hypothesis and keeping Second Reject the null hypothesis and keeping Third Reject the null hypothesis and keeping Fourth Reject the null hypothesis and keeping Fifth Reject the null hypothesis and keeping Sixth Reject the null hypothesis and keeping DISCUSSION AND CONCLUSION General result of research is that the costing system dominate over on tractor manufacturing company of Kurdistan under the name final cost plus many percent of profit( cost plus) due to wasting of resources, inefficient, lack of sensitivity to expenses and other deficiencies that finally due to unreasonable and unjustifiable in the final price of products of this company. via competition of market conditions and increasing pressure of customers for decreasing the cost of products that its signs are visible and touchable in the tractor manufacturing of Kurdistan, the economic governing of company with inefficient system of Cost Plus is very hard and risky. For this reasons, it is necessary that tractor manufacturing of Kurdistan company use costing system based on purpose that establishment conditions due to research findings is confirmed., because this technic is the suitable tool for accessing to final price and suitable sale price in the competition statue. Therefor can accepts that there is possibility of costing system based on purpose establishment in the tractor manufacturing of Kurdistan. Therefore the results of hypotheses are as below: First hypothesis searched that there is the relation between profit management and continuance of activity in the tractor manufacturing of Kurdistan. by collecting,investigating and analyzing of data recognized that there is the relation and there is the capability and enough potential in the tractor manufacturing of Kurdistan till this company can due to the benefits of costing system based on purpose, maximize profit from productions and be hopeful about continuance of its activity.there for, the characteristic of costing based on purpose is come truth that indeed it is earning expected profit. Second hypotheses searched that getting customer satisfaction has effect on continuance of activity in the tractor manufacturing company of Kurdistan. In the analyzing of tractor manufacturing company of Kurdistan gets this results that company by comparison with past is faced to increasing competition pressure in the tractor 1672

6 manufacturing industry.since customer is searching high quality and high efficient products and competitors pay attention to this important point, there for the company should can recognizes the few differences in efficiency (usefulness) and quality and it can covers competition pressure in the market and it improves its situation in the market.therefore this point comes true in the company and there is characteristic of customer satisfaction in the company that it is one element of this technic. Third hypothesis searched the response that there is the relation between products designing and continuance of activity in tractor manufacturing company of Kurdistan. Via collecting, investigating and analyzing of data recognized that tractor manufacturing company of Kurdistan has enough capability for new product designing and changing of product process for applying the costing system based on purpose. Fourth hypothesis searched that there is the relation between the way of relationship with providers of materials and pieces and continuance of activity of tractor manufacturing company of Kurdistan. By collecting, investigation and analyzing of data recognized that tractor manufacturing of Kurdistan can make coordination and cooperation with providers of materials and pieces for accessing the considered prices. Also, effectiveness of providers of materials and pieces from politics and outlines of company is increased and company can imposed its price for buying materials and pieces to providers of materials. one of the most important effective element on target costing is the relationship way with providers of materials, because if company can t get its purpose with cooperation with provider of materials and final pieces, all attempts will be ineffective. Fifth hypothesis searched the response that there is the relation between cost management and resources development in the tractor manufacturing company of Kurdistan..By collecting, investigation and analyzing of data recognized that the company by considering of necessary controls of quality and control of costs, made logical relation with resources and costs management. Because control of quality due to don t wasting of resources and the product delivers with lower price and higher quality. Therefore there is the relation between resource development and cost management in tractor manufacturing company. Sixth hypothesis searched the response that there is the relation between management of production units of tractor manufacturing company of Kurdistan and making the suitable organizational structure for supporting and protecting of costing technic based on purpose. By collecting, investigation and analyzing of data recognized in the tractor manufacturing company of Kurdistan feel the using of target costing system and changing of costing system and company management due to target costing system and fact of market, will support target costing technic.also, there is reciprocal understanding of units and all of the members of company try to produce the best product with the best production quality. Therefore, in tractor manufacturing company, the reciprocal understanding of units, as an important basis in the purpose technic is observable and clear and hypothesis due to existing conditions accept in the company. SUGGESTIONS Due to focusing on customer, is the guidance for decreasing of final price of products, therefore it is recommended that companies constantly make communication with their customers for receiving their ideas and they pay attention to their ideas about products designing. In other words, in the tractor manufacturing company develop comprehensive system about their activities' recommendations, because in this way, they can perform the customer satisfaction basis. It means comprehensive system of recommendations exactly do the job that it is the wish of tractor manufacturing. Target costing is the system that due to decreasing of costs and also more exact calculation of final cost of products. Therefore, recommend to companies that replace target costing instead of traditional costing system and determination of final cost. In this research observed that whatever we move to low level of company, knowing of staff decrease about company's activities. Therefore it recommends that by making effective informational processes in the company, help staff that they find wider view about their activities. As you observed that in the costing technic based on purpose, interaction and reciprocal understanding of staff and company units, is one of the important principle. Therefore if the managers have clear understanding about strategy for their staff, so that this subject be understandable for them. In this case, performing of technic becomes easy in the company. It recommends that before beginning of administrative operation of costing technic based on purpose, administrative group put under enough education and if it is possible, they observe companies that they have been performed this technic. Due to that present research performed in the tractor manufacturing company of Kurdistan, it recommends that possibility of evaluating target costing will be apply in the higher levels and deeply in the depended companies to tractor manufacturing of Iran in other provinces. It recommends that compare researches about comparing of costing system based on purpose that now they administer in the companies till finally target costing system will be apply with more assurance in the production companies. 1673

7 For emphasizing on investigated hypotheses in this research, it recommends, this research apply in other production companies of Kurdistan province. REFERENCES Azar,Adel, 1384, statistics and application of it in management, Samt publication, sixth publication. p Etemadi,Hosain, effective elements on necessity of using costing based on purpose, social and humanistic science, number 8, 1384 Hajazi, Rezvan and Albadavi, Amir (1384)(target costing) publication of industrial management organization Hajazi, Rezvan and Izadi, Masomeh, the investigation of target costing obstacles in automobile industry, automobile industry magazine, 1383, number 73, pp: Khaki, GHolamreza, research method in management, publication of Azad university, Namazi, Mohamad, Ramazani, Amir Reza, costing based on accounting management, social and humanistic magazine of SHiraz university, second number, spring 1382, p: 1-19 Rahmani, Ali, Rahmani, Halimeh,the best experiences in the target costing. Accouter, 1384,number 166, Rahnema Rodposhti, Faraidon, Jalili, Mohamad, costing based on making value, Termeh publication, Tehran, 1386, first SHabahang, Reza, (1384) accounting management, accounting organization publication, day 84 SHabahang, Reza,1382, study in new conception of accounting management, economic management, 56, p: