ABSTRACT
Target costing and value engineering provide considerable payoffs to early adopters. Before adopting target costing and value engineering, it is important to determine whether the firm's environment is changing in ways that support the adoption of the techniques and whether the benefits exceed the costs. This chapter focuses on six critical questions to be considered prior to adoption. The first question explores the increasing importance of profit management to the survival of the firm. The next three questions relate to the environmental conditions surrounding the three major sections that make up the target costing process. They deal with the growing importance of customer satisfaction, product design, and supplier relations. The fifth question deals with the relative benefits that can be derived from cost management as opposed to other projects to increase profits. The last question relates to the ability to create the right organizational context to support the target costing and value engineering processes.
