Question

Disadvantages of target costing

Answer 1

there are many disadvantages of target costing. Some of them are :
1)- the development process can be lengthened to a considerable extent since the design team may require a number of design iteration before it can device a sufficient low cost product that meets the target cost and margin criteria.
2)- A large amount of mandatory cost cutting can result in finger pointing of various parts of the company especially if employes in one area feel they are being called on to provide the disproportionately large part of the savings.
3)- Representatives from number of departments on the design team can sometimes make it difficult to reach a consensus on the proper design because there are too many options regarding design issues.
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hope it will help u

Answer 2

Disadvantages of Target Costing

• Since the target costing depends on the prediction of the final selling price of the product, any error in it may cause the entire marketing strategy failure.
• To achieve the target cost there is a possibility for the company to opt for cheaper technology or materials which is not an advantageous option in the long run and even becomes the greatest disadvantage.
• Target costing can create an unrealistic burden on the production department when the estimated cost is too low.
• Failure of proper estimation of the quantity may lead to a loss when the business fails to sell all the produced quantity.