Title:
INTEGRATING TARGET COSTING INDICATORS WITHIN THE BALANCED SCORECARD MODEL IN MALAYSIAN AUTOMOTIVE INDUSTRY: A RASCH ANALYSIS

Authors:
Hussein H. Sharaf-Addina, Normah Omarb , Suzana Sulaimanb

Abstract:
Target Costing (TC) adoption is not only for a cost reduction as a financial objective. Further, quality, functionality and lead time, as non-financial objectives, should be simultaneously perceived. This particularly requires an effective integration of relative financial and nonfinancial Organizational Capabilities (OCs) measures to assess future customers' expectations towards company's products development, TC focus. Using Rasch Measurement Model (RMM), this study aims to measure the applicability level of OCs measures related to TC four principles "Price-led", "Customer-focused", "Design-centered", and "Cross-functional" to be respectively integrated within the four BSC's perspectives "Financial", "Customer", "Internal Process", and "Learning and Growth" in association with industry type and company strategy effectiveness. Among 380 Malaysian automotive companies, 48 companies have participated in filling out the questionnaire. The results showed higher applicability level of the developed TC indicators except those related to suppliers' participation. Specifically, parts and components makers when employing confrontation strategy had higher ability towards integration process than car makers as well as when employing non-confrontation strategies such as cost leadership and differentiation strategies. The study has added a new idea on integrating TC with the BSC as an integral system. From the methodological perspective, the study has provided insights on using the RMM in management accounting research.