Cultural Perspectives on Target Costing
Hiroshi Okano
Professor, Urban Research Plaza,
&
Graduate School of Business,
Osaka City University
3-3-138 Sugimoto, Sumiyoshi,
Osaka 558-8585 JAPAN
TEL & FAX +81 774 64 0175
Email: okanohiroshi30@gmail.com
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Abstract
This paper deals with some historical features of management accounting, while at the same time
using methods within the context of cultural history to depict the state of target costing as something
that “forms” or “composes” itself independently. In other words, by discussing the continuity and
discontinuity of target costing and considering the process of target costing’s institutionalization in light
of the multi-layered structure of culture, the author attempts to identify the distinctive features and
archetypes of the management system, and then describes the process in which independent technology
is formed as such features interrelate with each other. This paper has dealt with target costing in order
to detail the present state of Japanese management accounting by taking note of the history of
practice in describing historical continuity and discontinuity. The author concludes that it is
important to discover one’s own identity by taking note of the interpenetration of historical
continuity and discontinuity (changes) to locate new possibilities in history, while at the same time
focusing on the composition of Japan’s multi-layered “culture.”
2
1.Introduction
During the “lost decade” following the breakup of Japan’s economic bubble, one Japanese company
after another made a shift in personnel evaluation to systems centering on individual performance, e.g.,
merit-based pay systems, and pushed through management accounting “reforms.” Another set of major
“reforms” were conducted during the economic crisis stemming from the subprime mortgage meltdown
in the United States. Having long played an “unsung” role since the end of the World War II,
management accounting is now being taken advantage of by various players as a form of technology to
give direction to “reforms.” One may well wonder what other roles management accounting will assume
from here on.
So far, Okano(2009) has shed light on the interpenetration process between practice and theory of
“Japanese management accounting” using mostly historical methods. Japanese management accounting
can be characterized by the fact that, while paying attention to one aspect of accounting, i.e.,
“invisibility,” it not only emphasizes the management of entities, such as JIT, cell-type production
systems, other production control systems, and kaizen activities, but also attempts to resolve
“invisibility” as a part of upstream management through both “combined use” and “zurashi
(displacement)” of target costing, cost improvement, and cost maintenance 1. In this way, it has become
possible to extract the shapes of “reforms,” as well as the Japanese notion of “acceptance” (Okano
1995a).
This paper deals with some historical features of management accounting, while at the same time
using methods within the context of cultural history to depict the state of “Japanese management
accounting” as something that “forms” or “composes” itself independently at private enterprises,
academic societies, etc. 2 In other words, by discussing the continuity and discontinuity of Japanese
management accounting and considering the process of target costing’s institutionalization in light of
the multi-layered structure of Japanese culture, the author attempts to identify the distinctive features
(cross-functional management, genba & genbutsu principles, emphasis on voluntarism, causal
management) and archetypes of the Japanese management system, and then describes the process in
which independent technology is formed as such features interrelate with each other.
2. A Cultural Perspective on Japanese Management Accounting
2.1 Accounting and culture: History of practice
Changes in businesses’ operating environment trigger changes in the state of accounting, which then
1
This idea is important as it relates to typically Japanese editing techniques such as “kasane (overlapping)” and
“zurashi (displacing),” which are described in greater detail hereafter.
2 Japan Accounting Association held a round table talk entitled “Continuity and Discontinuity of Japanese
Management Accounting” at its national conference at Rikkyo University in September 2008. On that occasion,
interpenetration between management accounting and financial accounting (restructuring systems and new
possibilities of Japanese management accounting), interpenetration between “practice” and “research,” directions
for research strategies (relationships between individuals and academic societies), and “succession and
development” of management accounting research were reported and discussed (Okano 2009a).
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prompt such businesses to change the ways in which they conduct their activities. In order to describe
the history (changes) of “interactivity” between accounting and business activities, it is not sufficient to
perceive accounting merely as a neutral device for recording and reporting the “facts” of economic
activities. Rather, it must be understood that accounting is a series of “technologies” and “practices” that
influence the typology of the world in which we live and social realities, and also have a bearing on
methodologies for discovering the options open to enterprises and individuals, managing and organizing
diverse activities and processes, and governing oneself and others (Okano 2008).
In order to describe this “history of practice3,” one must accept knowledge gained from many
different approaches to social and cultural history. It should be especially noted that, since culture is
something that individuals and groups create and benefit from, one cannot discuss culture separately
from the state of the society in which it was born when pursuing the development of culture in light of
the interrelationship among creators, cultural assets, and those who benefit from them (Abe & Nishigaki
2002). As such, communications between subjects that “create” and subjects that “benefit” are of vital
importance4.
Okano(2003) interpreted target costing as a space where people with mutually different perceptions
can communicate under circumstances where diverse and dissimilar accounting functions exist that are
embedded5 in various organizations such as Engineering, Purchasing, Production, Accounting, and
Sales. For target costing to be widely recognized as a reliable management system in a global setting, it
would not be enough for “calculation systems” such as target costs and target profit to simply become a
“common language.” Rather, in addition to this, it would be necessary to clarify the influence of target
costing on “management systems” such as merit rating and “social systems,” or the interrelationship
among the three systems – management, social, and calculation. And it is “culture” that bears the most
significant meaning in the analysis process.
It is within this context that accounting may be understood as an institutionalized structure for
practicing calculations and recognized not as a “mirror (technique)” that simply reflects economic
realities, but rather as a technology that builds up such realities. Furthermore, costs are deemed to be
“socially structured” on account of individual knowledge and recognition of place and the recognition of
what is “taken for granted” by society, but what they are structured is situation-dependent.
Accounting is now regarded as something that ranks among other areas once monopolized by
groups of specialists other than accountants, such as engineers, lawyers, economists, and entrepreneurs,
3
As for practice-based strategy and its influence to management accounting research, refer to Schatzki, et al.
(2001), Johnson, et al.(2007), Ahrens & Chapman(2007), Chua(2007).
4 When investigating the social and cultural significance of accounting, it becomes necessary to analyze both
continuity and changes during a transition, such as that from the Edo period to the Meiji Restoration (Hopwood &
Miller 1994, Okano, et al 2004). In other words, it would be essential to analyze accounting’s relation to the
implantation of a modern “company system” and how the “company system” in the Edo period was related to the
business administration system as a whole, as well as the account book system collectively referred to as
daifukucho. That is to say, one must redefine the issue as one that concerns how technology and work should be
promoted, the relationship between accounting and collective entities such as management organizations and
organizational culture, and problems in accounting education in Japan, namely, overstressing the education of
bookkeeping techniques, while also reviewing the process of bookkeeping penetrating into (and being resisted and
opposed by) actual business administration.
5 This recognition of “embedding” is also related to the interpretation that “costs are created,” and there is
recognition that costs are not something that one can interact with like a substantive entity. Accordingly, costs may
be interpreted as a “product (= construct)” of a “decision” by a subject, rather than the “result” of an “occurrence.”
4
and that has been established as its own special field (Hopwood & Miller 1994). Accounting uses
diverse calculation techniques to yield a single end product in numerical terms, i.e., profit, and then use s
that number to initiate possible actions vis-à-vis other actions. It is here in the sole numerical product
that the neutrality and objectivity required of accounting lies. This mechanism allows accounting to
separate itself from the spheres of politics and stratagems, instead attempting to achieve “orthodoxy”
based on a single requirement under dispute. One could argue that this represents the character of target
costing (Okano 2006b, Okano & Suzuki 2007, Ansari, Bell & Okano 2007).
On the other hand, however, even though accounting is “regarded as something that ranks among
other areas once monopolized by groups of specialists other than accountants, such as engineers,
lawyers, economists, and entrepreneurs, and that has been established as its own special field,” this does
not mean that the calculation structure (calculation system) of target costing has been consolidated into
one system. In other words, the recognition of costs differs as it is perceived by various subjects, such as
Engineering / Production Engineering, Accounting, Purchasing, Sales and Marketing, and Quality
Control. One could say that the accounting function at Japanese enterprises, in particular, has been
dispersively embedded among multiple relevant organizations.
2. Multi-layered structure of culture and archetypes
In the stratum6 of the history of Japanese management accounting discussed by the author in earlier
papers (2006a, 2008a), one can see the state of the four features or archetypes (hidden forms) 7 of
Japanese culture (Kato, et al. 2004). Let it be supposed that just as sediment builds up to produce
stratum, many different cultures also accumulate to form the stratum of a multi-layered culture. The
“multi-layered structure” here involves that among organizations, among enterprises, and on the social
level, as well as one on the individual and separate levels. The author hopes to focus on the
“multi-layered structure” as a concept that includes the diversity and multiplicity encompassed by it
(Okano 2004). It would thus be necessary to closely analyze the relationships that go beyond time and
space among different fault planes. By taking note of how those fault planes overlap with each other, the
author wishes to raise questions about what compound meanings these features have, and through what
process those meanings converge into one single meaning.
Matsuoka (2006) made an attempt to access archetypes. With a focus on the methodology (editing
technique) of Japanese cultural formation, Matsuoka adopted the approach of binary oneness rather than
that of binary opposition, and attempted to reveal essential qualities that have yet to be verbalized. He
insists that unique techniques, such as “omokage and utsuroi (to remember and project)” or “awase,
kasane, kisoi, and soroe (to coexist, overlap, compete, and integrate),” are strongly reflected in the way
6
Okano(2008) took up stratum in the generation / development process of management accounting in Japan, such
as the relationship between scientific management and management accounting (the particularity of scientific
management under management familism) and roles of accounting during the wartime regime and under the
occupation (as it was only after Japan’s defeat became clear that cost accounting ceased and a shift was made to
basic units accounting), and investigated issues concerning descriptions of the history of management accounting as
the history of society and culture. In particular, with regard to the Japanese management system and “practice” of
management accounting, the author took notice of the form of Japanese “acceptance,” meaning that the author does
not believe that management accounting was merely “introduced” or “imported” unilaterally.
7 Takeda(2004) described it as the way of thinking and value consciousness that concern the sphere of the
collective unconscious.
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that culture has been extracted. The functional management and shop-floor-first principle, which are key
features of the aforementioned Japanese management system, correspond to awase and kasane, while
emphasis on voluntary will corresponds to kisoi. It is safe to say that management including close
“reconciliation” with suppliers is related to all of these verbs.
Okano(2008a) attempted to interpret the historical features of Japanese management accounting
with “zurashi,” in addition to the aforementioned verbs. In more concrete terms, to perform target
costing, the author worked at the production stage to chiefly conduct entity management on the
materials dimension (assignment level) centering on management of basic units, in order to prevent
accounting from being invisible. Then, for the main part of cost management, the author created target
costing as a method for accounting management and management through figures that focuses on
designed cost by “displacing (zurashi)” the timing from the production stage to the design stage.
Some of the key points of this view of cost management are to: 1. change to inexpensive products
(kaeru), 2. extend service life (nobasu), 3. revise standards and criteria (kaeru), 4. recycle (naosu), 5.
improve operations (tomeru, kaizensuru), 6 increase yields, 7. reduce defects (sageru), 8. invest in and
renovate equipment (torikaeru), and 9. conserve energy (yameru, naosu, tomeru, sageru, hirou, kaeru),
spread horizontally (yokoten), do things in-house, dissolve unreasonableness, inconsistencies, and waste,
etc. Each of these verbs has a meaning opposite to “awase, kasane, kisoi, soroe,” which have been
traditionally practiced by Japanese people. This is another example of multi-layered cultural features in
Japan, where heterogeneous things coexist.
If we set about simplifying these trends, one could say that the inside and outside (inside and
outside of a company), top and bottom (the middle including both the top and the lower in a hierarchical
organization), verticality and horizontality (matrix organization based on functional management and
product manager organizations), and hardware and software (systems and people) have all made efforts
to create interactive relationships based on the principle of binary oneness, rather than binary opposition
(Okano 1995a)8.
If we elaborate on the attempt to “verbalize” accounting and translate it into an “event,” the
essence of value engineering (VE) is to draw out the past experiences of designers and others in the
development team that have been embedded within their subconscious by converting “things” into
“events” through a process of sorting products and service functions into “objects” and “verbs,” and
then promote communications with invisible personnel or unmet potential customers.
Target costing has been a calculation system and management system for providing VE with goals
or directions. In order to make it an effective tool, social systems such as those related to suppliers and
unique contract systems have been created.
In a paper from 2003, the author discussed the idea that target costing is distinct from conventional
management accounting systems, and that it is characterized by integration between market-oriented
calculation (reverse calculation) and technology-oriented calculation, a shift of emphasis from incurred
costs to determined costs, a calculation and management system by “things” rather than “by place” or
“by section (people),” and simultaneous achievements of various factors including costs, product quality,
8
In this regard, it is important to consider syncretism, eclecticism, and the syncretic fusion of Shintoism and
Buddhism. See Sueki (2006).
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delivery time, efficiency, and the environment.
3. Features of the Japanese Management System
3.1 Cross-functional management and policy management
After the war, TQC (total quality control) was systemized by the American quality control scholar A.V.
Feigenbaum. To be more specific, it can be described as a self-sustaining quality control system using
specialist personnel, which took as its basis statistical methods that incorporated Shewhart’s ideas about
quality management.
At the same time, in Japan, it was developed as CWQC (company-wide quality control) 9 involving
all employees, thanks mainly to the efforts of a variety of practitioners involved with such institutions as
the Union of Japanese Scientists and Engineers and the Japanese Standards Association, who were
assisted by Japanese academics and American quality control experts such as W.E. Deming and J.M.
Juran.
One of the key concepts of this was ‘cross-functional management’, which is distinguished from
‘departmental/functional management’. What should be noted here is that the semantic content of
‘function’ is not the same ‘function’ as in Europe and America, which presupposes a ‘department’, but
encompasses such critical factors in management as ‘quality’, ‘cost’, ‘reliability’, ‘delivery dates’ and
‘overseas’ (Ishikawa 1984, TQM Committee 1998, Udagawa et al. 1995).
This cross-functional management is a mechanism for promoting factors important to the
management of a company, such as quality functions, cost functions and overseas functions, by means
of their cross-sectional coordination with related organizations, and implies horizontal organizational
management. Historically, it was formed amid the process of introducing TQC (total quality control). It
is antithetical to the ‘functional management’ of Europe and America, which consists of departments’
systems of responsibility and authority.
In other words, it is closely linked to the features of ‘Japanese quality control’, which creates an
overlap between the functions of each organization and emphasizes cross-functional activities. There
was a loose relationship between ‘business and people’ and, by overlapping ‘the work itself’ and getting
all employees to commit themselves, the system induced them to take on ‘responsibility’. 10
Cross-functional management was introduced in the early 1960s, around the time when TQC was
beginning to take place. At the time, there were strong vertical links in organizations, with hierarchical
relationships, for example within the manufacturing division and the sales division, and there were
barriers to horizontal relationships, due to sectionalism, so communication was difficult.
Cross-functional management involves setting up cross-functional committees or conference structures
relating to such issues as quality assurance or cost controls, and seeking to supervise and improve these
functions by promoting them within each department, in order to deal with problems that are related to
the horizontal organization, which cannot be solved by one department within the vertical organization
9
See Sunaga & Nonaka (1995) for details of ‘Japanese transformation’ in quality control.
Even with Honda’s ‘big room’, the aim can be described as the exchange of information both formally and
informally in processes that result in decisions being made, rather than aiming to create an overlap between formal
responsibilities.
10
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(Kurogane 1988).
In contrast, policy management involves activities carried out by means of cooperation between all
parts of the company, in order to determine medium- or long-term business plans and policy for
short-term business plans, based on management policy, and carry them out efficiently. This is a vertical
management mechanism that links improvement targets in the upper levels of management with
individual management targets such as the improvement of plant processes, and is different from the
‘strategic management’ carried out in Europe and America.
This cross-functional management, which enhances ‘vertical’ and ‘horizontal’ relationships, suffers
from a major problem in terms of the clarification of authority and responsibility and, even if it is
appropriate for work that involves the entire company, it also carries the danger of becoming isolated
from the workers on the ground and resulting in flawed decisions.
3.2 Genba and genbutsu principles11
Genba (Genbutsu, go and see) principle is a concept under which specific, individual problems become
clear for the first time by experiencing the phenomena that occur at each site (not at the HQ office), and
can be seen uniformly in production and sales by Japanese companies. In particular, in plant
management, it has come to be regarded as the cornerstone of efforts to eliminate ideas and management
systems that have become isolated from a sense of the workplace.
This also corresponds to the fact that in-house training programs, focusing mainly on OJT
(on-the-job training) is commonplace (Odaka 1993, Hisamoto 1998). The results that have emerged
from ‘Japanese production systems’ such as the aforementioned CWQC and JIT (just in time) can be
reduced to this gemba and gembutsu principles. 12
At the same time genba and genbutsu principles are used in the logic used when eliminating cost
accounting, which emphasizes basic unit management focusing on physical measurements and is a form
of currency unit management. In other words, ‘accounting’ 13 limited to monetary measures was
eliminated in order to avoid accounting invisibility, 14 and, although it seems paradoxical, ‘Japanese
management accounting’ was created. 15
As a result, cost management techniques characteristic of each company are developed. Examples
of this include NEC’s ‘two-stage standard cost accounting’ (Nakayama 1963) and Toyota’s ‘target
costing’ and ‘kaizen costing’. As can be seen from the observations of Taiichi Ohno, who formulated
Toyota’s production system, genba and genbutsu principles were of great significance in the elimination
Along with ‘genjitsu principle (reality-orientism)’, gemba and gembutsu principles are also known as the ‘3-gen
principles’.
12 Various groups and organizations were established in order to complement this, including the Union of Japanese
Scientists and Engineers, the Japanese Standards Association, the Japan Management Association, the Japan
Productivity Center (currently the Japan Productivity Center for Socio-Economic Development) and the Kansai
Productivity Center, the Japan Chamber of Commerce and Industry and the Japan Industrial Management and
Accounting Institute. In addition, various educational institutes, such as universities and technical colleges, have
made a contribution either directly, or indirectly as members of the aforementioned bodies.
13 Okano(1995a) attempted to clarify the features of ‘Japanese management accounting’ through the correlation
between quantitative management and accounting management, using the concept of ‘accounting invisibility.’
14 Here we refer to accounting not only at the monetary level but also at the quantitative level.
15 On the other hand, variation analysis by means of standard cost accounting was used as part of initial phase flow
control.
11
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of ‘accounting invisibility’ (Ohno 1971).
However, on the other hand, profit planning and kaizen costing linked to budget controls existed i n
tandem, and one could even go so far as to say that, in that sense, there were two layers of site
management. Cost accounting as financial accounting was standardized by means of the Cost
Accounting Standards enacted in 1962, and it was certainly not the case that these merely reinforced
cost accounting as management accounting that encompasses cost controls. 16
Fujimoto (1997) stated that genba principle possesses mechanisms in which new concepts arising in
the domain of production are weeded out by means of the so-called ‘quasi-market’, which portrays the
production site as customers; an example of this can be seen in the introduction of new automated
equipment, where it is necessary for production engineers to ‘sell’ the new ideas embodied in that
equipment to those on site. This can also be explained in terms of the necessity for cross-functional
activities carried out by means of thorough cross-functional management, as mentioned previously,
when making decisions about investing in equipment as well.
3.3 Emphasis on voluntarism
Practices at companies such as NCR and Ford 17 were used as the models for introducing suggestion
schemes, bearing such names as small group and QC circle activities, to Japanese companies, but there
were major differences. To be specific, while the main aim in American companies was to elicit ideas
from employees that would lead to cost reductions or an increase in profits, with evaluations of those
responsible for the implementation of the system being made according to the figures in the company’s
books, the aim in Japanese companies was participation in the system by company employees, with
evaluations of those in charge of the scheme being decided according to the degree of participation by
employees (Robinson & Stern 1997). In other words, it was positioned as a voluntary management
activity in which the group was organized by workers at the same workplace, voluntary targets were set
in a ‘forum’ for discussion that had at its core a leader chosen from among that group, and effor ts were
made to achieve these.18
Of course, this was promoted as part of the CWQC movement, and one could not really say that the
workers organized themselves ‘voluntarily’. Nevertheless, one should take note of the fact that “the term
‘voluntary management’ indicates its origins in small group activities, which arose as a means of
making use of employees’ voluntarism.” (Hyodo 1997) The fact that most QC circle activities initially
took place outside working hours demonstrates this. 19
At the same time, with regard to relationships with suppliers, a voluntary forum for improvement
activities that focuses on production processes can be created. Toyota’s ‘Jishuken voluntary study group’
and ‘Supplier Support Center’ are examples of this. At the Supplier Support Center in Kentucky, care is
16
Hioki (1998) states that Japan’s plants were the first to take the view that on-the-ground intelligence is superior
to that of technicians.
17 According to Robinson & Stern (1997), the oldest recorded suggestion scheme was introduced in Scotland in
1880, at the shipbuilding firm William Denny and Brothers.
18 The steel industry promoted small group activities throughout the industry, but the term ‘autonomous
management activities’ (JK activities) was used for quality control groups and ZD activities.
19 However, it should be borne in mind that, as small group activities have been positioned as part of top-down
policy management since the oil crises of the 1970s, this voluntary nature has altered.
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taken to ensure that individual information, such as which suppliers are conducting activities regarding
what kind of themes, is not disclosed to Toyota via formal routes. Naturally, by emphasizing the fact
that it is voluntary, they are ultimately trying to avoid lagging behind their competitors and are hoping
that it will actually have the effect of increasing its coercive power, but it is first and foremost not
compulsory and it is important to maintain its voluntary nature 20.
3.4 Built-in quality and costs, and causal management
Quality and cost control activities that take place in Japanese companies have been positioned as
activities involving the entire company that are carried out by both staff and lines based on ge nba and
genbutsu principles. This is due to the thorough implementation of ‘causal management’, which takes
the view that ‘quality and costs are built in on site’, based on awareness that ‘quality and costs are fixed
prior to the design stage’.
This differs completely from practice in America, which is centered on staff (comptrollers, etc.)
who are experts in quality control and cost control, and many methods of quality engineering, such as
QFD (quality function deployment) have been devised. In VE (value engineering) as well, the intention
is to implement not only ‘second-look VE’ at the production stage, but also ‘first-look VE’, which
extends to the design stage, and even ‘zero-look VE’, which goes all the way back to the product
planning stage.
Moreover, the aim of the ‘guest engineer’, which commonly takes place as part of the product
design process, is not to reduce costs through negotiating prices, but to increase the effectiveness of VE
and kaizen costing and build a long-term win-win relationship by ensuring that engineers working for
the manufacturer and suppliers share a common ‘awareness’ of the link between costs (design costs) and
specific individual improvement activities. This creates ‘trust’ between the manufacturer and suppliers
and it can be said to be a device for communication about costs rather than prices, taking place on the
basis of this trust (Sako 1992).
In other words, it is ‘target costing’ with the aim of eliciting ideas from both sides, for instance,
about improvement methods, which takes place through the medium of the common word ‘cost’; it is
clearly distinct from ‘target pricing’, which focuses on negotiations and maneuvering relating to the
retail price. The basis for this is the unique Japanese trading custom that involves a ‘basic commitment’
being concluded, but individual orders being made routinely by means of ‘Kanban’, with no ‘real’
contract involving price and number of items, while price revisions are made regularly with the
agreement of both sides.
In addition, although it is necessary to ‘observe prior processes from the next process perspective’
in order to ‘build in’ quality and costs, JIT, which is referred to as the ‘pull formula’, is generated by an
awareness that ‘the next process is our customer’. It is well known that foundations of this concept
originate in the ideas of Taiichi Ohno and others, who asked whether it would not be possible to use the
20
Nevertheless, with the spread of management by policy, this voluntary nature has been in retreat, particularly
since the oil crises, and it is said to have become an activity led by those at the top of the company. We would
like to examine this further in the future. See Kaneko et al. (1998) for more about the vast power of voluntarism
in economic activities.
10
supermarket formula, which many participants in a delegation visiting America after the war had
admired, in factory management.
4. Features of target costing: Its institutional features
Target costing is distinct from conventional accounting in terms of both its calculation structure and how
it is operated, and has many unique features across the globe (Okano 2003). That is to say, target costing
has been attempted by global manufacturers of home electronics and automobiles in Europe, North
America, and Asia, and has developed its own style through modification by the features of each
individual enterprise and industry. This can be discussed from the perspective of the “multi-layered
structure of culture” (Okano & Suzuki 2006, Okano 2006a).
In this paper, the author wishes to discuss the features of target costing at Japanese enterprises by
focusing on the following, namely, the computational reflection of a Japanese management system that,
as pointed out in the previous section, consists of the four elements of the functional management,
shop-floor-first principle, emphasis on voluntary will, and upstream management and craftsmanship.
Conversely, one may argue that this calculation system (including calculation rules) has helped to build
up the Japanese management system (Okano 2003).
Target costing makes a clear distinction with an ordinary accounting both in terms of accounting
structure and the way the system is managed. The features can be summarized as follows:
4.1 Convergence into single-unit products and services
One of the most typical features of target costing is that every calculation begins by calculating the costs
of single units of products and services. There are two ideas behind this: the first is the desire to exclude
overhead costs as much as possible from the calculation system so that the amount of costs does not
fluctuate greatly depending on production volume, and the second is the notion that, for customers, the
single product that they have purchased is everything.
This is the costing version of the concept that an “individual” represents the “all,” and the very idea
of creating a calculation system that concentrates on single units of products and services is completely
different from the conventional accounting approach that assumes allocation of overhead costs. In order
to focus on the costs of single units of products and services, it is necessary to make assumptions about
matters that have yet to be determined at the development stage, such as the rules for calculation and the
relationship with the management system. The following points are closely related to this alone.
4.2 Basic unit and rate: separation between target costing and capital investment planning
The first characteristic is that cost subject to the target accounting is the basic unit (physical unit)
multiplied by a rate in its accounting logic. Especially, the target costing is considered as an activity lead
by design engineers to reduce the basic unit itself through the design drawing improvement. Take spot
welding, for example, efforts are made to reduce the number of shots from 3 to 2.
On the other hand, the capital investment planning is an activity to reduce the cost of a basic unit by
cutting the rate through the efficient use of the facility.
Here production engineers play a leading role.
For example, the cost per shot is cut by sharing equipment or by effectively using the existing facilities
11
(Table 1).
Movement to separate target costing and capital investment planning accelerated in 1980s, as
capital investment increased sharply with the rapid introduction of FA and CIM.
However, recent
globalization and intensified competition started to make the company to review this separation again,
as described in chapter 7 of this book.
In other words, it has become increasingly necessary to carry
out target costing as an integral part of the product development in the entire organization.
Table 1: Target Costing and Capital Investment Planning
Target costing
Capital investment planning
Division in charge
Purpose
Engineering div.
Reducing the physical scale
（design engineers）
（basic unit＝not a financial scale）
Production engineering div.
Reducing cost per physical scale
(Production engineers)
（Source）Okano (2002b), p. 99
4.3 Two dimensions of cost: ‘incurred cost’ and ‘committed cost’
The second characteristic is that the target costing focuses upon ‘committed cost’ instead of
‘incurred cost’, which used to be the focus of calculation in the existing cost accounting. Cost
management at a committed level is conducted, prior to the production. It is a ‘fictitious
calculation21’ that adopts a ‘special cost concept’ or ‘design cost,’ and the basis of calculation has
been shifted from the calculation of ‘place’ to that of ‘goods’.
Specifically, target costing allows calculation to be ‘finalized’ at the designing stage, by
aligning designing postulates between the new and existing products, and by eliminating uncertain
elements relevant to production and suppliers in the calculation. On the other side, a huge
separation between calculations at a production stage and that at a designing stage can be avoided
by making an alignment between the two after the start of production.
Beneath this lies recognition to control a process in which cost is ‘committed’ instead of the
process in which cost is ‘incurred.’ In other words, it is an idea to try to project a target cost at a
sketch level before design drawings of a part is finalized and to try to make a balance between the
cost of a product as a whole and cost at a part level, under the framework of making a profit.
In the same way, suppliers are expected to follow the similar process. This method was
meaningful for both the assembly manufacturer and suppliers. It is because that the Japanese
suppliers often undertake major designing and seek approval from the manufacturer. The assembly
manufacturer can enjoy a certain cost reduction through a proposal made by the supplier, even if
the assembly manufacturer does not have data relevant to cost. On the part of the supplier, working
and studying together with engineers of the assembly maker makes it much easier for them to sell
their products to other assembly manufacturer. The approved drawing and the drawing for loan
21
In this ‘fictitious calculation’ ‘incurred cost’ is regarded as a ‘real’ cost. Refer to Kato (1993) for target costing.
12
have different cost structure, and it is safe to say that such a difference was brought by the unique
relationship between manufacturers and suppliers in Japan
In the example of the target costing cited above, different concept on cost was created before
the mass production (the design cost) and after the mass production (real cost/standard cost).
Even prior to the mass production, difference in cost concept could occur in various processes,
including preparation for production and product design, product design and process design, and
quality control and production control (Figure1).
Figure 1: Relationship between Design Cost and Actual Cost of the Existing Product and the New Product
（Current）Design cost at designing stage
（Committed level）
⇒ Actual cost at production stage
（Incurred level）
↑
Gap
↓
（New product）
Design cost at designing stage
（Committed level）
⇒
Actual cost at production stage
（Incurred level）
（Source）Okano (2002) p.162
Occurrence of such a gap is inevitable in some sense. The more the company is oriented to the
source management, the more often gap arises, it is, therefore, necessary to establish an accounting
method that suits respective purposes. Accounting made before the mass production, for instance,
at the development stage, and accounting made after the mass production become self-contained,
and each process rotates the PDCA (plan-do-check-action) cycle without relating to each other
from a calculation point of view.
Take an example of target costing and kaizen costing. They are not related to each other in
terms of calculation; target costing is a ‘calculation by product‘ using a technical and cost
engineering approach, or design cost, whereas kaizen costing is a calculation by segment that uses
a accounting (financial) approach which mainly consists of a period profit and loss calculation.
The difference exists not only from a computation system viewpoint, but also at organizational
activity level. It well illustrates that various relationships prescribe the calculation structure, and
the calculation structure prescribes various relationships. It is a challenge to figure out how and
which theory can link them.
4.4 Company-wide activities built in the organization: distributed accounting system
The third feature of target costing is that it simultaneously manages quality, cost, delivery date, and
efficiency (ex. environmental conservation) as well as cost. A system is established in each process
of target costing, where relevant organizations make commitment by function, such as quality and
cost, in the ‘functional management structure’. This caused a conflict/interrelation between
‘engineering’ and ‘accounting’ divisions, as asserted in the study of the history of management
13
accounting (Tsuji 1971, 1988, Wells 1978). In addition to this, the function of management
accounting (accounting function) was distributed among designing, production engineering 22 ,
purchase, and sales and marketing divisions23. Especially, it is distinctive that purchase, accounting,
production engineering, sales divisions also make a commitment at an early stage, besides
designing and development departments. It is important to notice that a rugby style is emphasized
in stead of the relay race style in the development method (Nonaka, 1990). It gives greater
importance on a process than a result. It is built in accordance with a specific issue in the process
management, such as design development and preparation for production.
Target costing is also characterized by a long-term budgetary control by product. Clark (1923)
asserted, “Different cost for different purpose.” It has an important implication in the history of
management accounting. However, the concept of the target costing of Toyota far exceeds Clark’s
idea. Cost is not regarded as a cost that is subject to objective calculation of the results of activities.
Toyota regards cost is something to be created to conform to specific purposes.
Especially, target costing in Toyota emphasizes calculation of technical cost according to the
purpose, using the differential cost estimate method. Important points in comparing cost are:
(1)
alignment of postulates and calculation methods so that the cost calculation method meets the
purpose, (2) adjustment of classification method, the account headings, depreciation and
calculation methods, in comparing cost between companies, (3) comparison of the cost under the
standard load．
From the observations given above, it can be understood that the target costing up to now
carried an essential quality of the Japanese management system. The cross-functional organization
system, which is a postulate for the target costing system, is the deployment of the management by
function.
It is an idea from a work place and an idea based upon a principle making much of
actual goods that focuses on cost at a committed level in order to avoid accounting visibility, and
mainly uses cost at a technical level. Learning opportunities provided in (among) organizations
postulated emphasis on the voluntary activities. Here we can find ideas of source management and
ideas that quality/cost must be built-in through their focus on the relationship between incurred cost
and committed cost.
Target costing is distinct from conventional accounting in terms of both its calculation
structure and how it is operated, and has many unique features across the globe (Okano 2003). That
is to say, target costing has been attempted by global manufacturers of home electronics and
automobiles in Europe, North America, and Asia, and has developed its own style through
modification by the features of each individual enterprise and industry. This can be discussed from
22
With the rapid introduction of CIM in 1980s, many companies made a division of work between ‘design
engineers’ and ‘production engineering engineers,’ and separated target costing and capital investment planning.
While target costing is an activity for person in charge of designing to reduce the basic unit itself (number of shots
for spot welding), capital investment planning is an activity for production engineers to reduce a cost per basic unit
(cost of spot welding).
23 Okano(1995a) asserted that respective accounting function, such as engineering, purchase (procurement),
production engineering, maintenance, and quality assurance, should be examined, besides the separation of cost
engineering and cost accounting, which has been already cited.
14
the perspective of the “multi-layered structure of culture” (Okano & Suzuki 2006, Okano 2006a).
In this paper, the author wishes to discuss the features of target costing at Japanese enterprises
by focusing on the following, namely, the computational reflection of a Japanese management
system that, as pointed out in the previous section, consists of the four elements of the functional
management, shop-floor-first principle, emphasis on voluntary will, and upstream management and
craftsmanship. Conversely, one may argue that this calculation system (including calculation rules)
has helped to build up the Japanese management system (Okano 2003).
4.5 Setting target costs (difference or absolute value)
The fifth point concerns the measurement or target costs, namely, what items should be included in
costs, and the question of how to determine a unit for totalizing costs, i.e. whether to use the
difference between the current model and the next new model, or the absolute value of the new
model.
Concerning the former, there are cases where cost items are included to a limited extent
throughout the entire process from development to preparation for mass production (e.g., limiting
to design costs and manufacturing costs as Toyota Motor did and those where cost items are added
as the development stages progress (as at Panasonic). On this point, two possible cases arise: one
where a cost engineering approach comes to the fore and another where views of purchasing
components take precedence.
As for the question of whether to use the difference or absolute value, if one assumes
continual transactions with certain suppliers, using the difference between the current model and
the new model matches the practice of conventional target costing, which is based on keiretsu
enterprise groups. One could say that the relationship among enterprises reflects the state of
calculation systems.
The drawback of this approach, however, is that it can be reduced through incrementalism.
Because of this, Toyota made a shift in 2000 from the difference to absolute value on the back of
changing competitive conditions and rapid globalization. Since that time, they have put greater
emphasis on a series of activities such as the Construction of Cost Competitiveness 21 st Century
(CCC21) and Value Innovation (VI) that stress target costing for strategic components in the
technological development phase, which is farther upstream than the product development project
(Okano 2003).
4.6 Preconditions for reverse calculation (market-oriented calculation) and setting of target costing
Referred to as reverse calculation, the idea of target costing begins with the prices that are
evaluated by customers in the market. However, it should be noted that this is not the only
precondition to set target costing. For example, not only are target selling prices discussed at target
costing-related meetings and used to set preconditions, but production volume (Sales Planning), the
amount of capital expenditures and man-hours (Production Engineering), and the factory that will
produce (Production Control) are also considered. This process is also closely related to the system
where each responsible section independently sets their own targets for each production project,
15
and assumes an organic linkage with management by objectives.
From the above considerations, target costing may so far be understood as possessing the
features of the Japanese management system as well. In other words, the cross-functional
organizational structure, which is the premise of target costing, is an extension of functional
management. The entire idea of focusing on the level of cost determination to avoid accounting
visibility and using costs chiefly on a technological level is derived from the shop-floor-first
principle. In a similar vein, the emphasis on voluntary will consistently forms the premise of
systems for (inter-)organizational learning in many different forms, and lying behind the focus on
the relationship between determination and accrual of costs are ideas of upstream management and
building in quality / costs.
4.7 Decentralization and integration of accounting functions
Japanese companies have dispersed their accounting functions over many different functions such
as Product Engineering, Production Engineering, Accounting, Purchasing, and Sales, and have built
up a concurrent development system with this strategy at its core. In order to integrate these
dispersed accounting functions, they have also made attempts to reconcile various perspectives on
costs, which often differ greatly from one function another, into one single perspective.
For example, in its target costing process, Toyota Motor has compared two kinds of costs in
two different dimensions – actual costs of current models and estimated costs of new models – after
adjusting various premises on design drawings between current and new models, and has striven to
compensate for any differences between the two. It is no easy matter to estimate target costs and
target profits, and to coordinate VE and other specific target costing activities at a stage when key
conditions – such as the factory and suppliers – have not been decided. Due to the existence of this
integration process within a “virtual” calculation system, Toyota’s approach has served as an
effective management system, and this “system” is what is referred to as an “integrated / distributed
management accounting system.”
Enterprise Resource Planning (ERP), which one enterprise after another has introduced in
recent years, could in a sense be regarded as an attempt to integrate these different business
systems24. That being said, the system of ERP – viewing “goods” and “money” as existing in a
one-to-one relationship – demands major changes in the “Japanese” way of working.
Among some of the new directions for integrating what has been dispersed are the extension
of target costing, action standard approach, life cycle (cost) analysis, and quality cost calculation.
As described above, budgetary systems and other systems such as cost improvement and cost
maintenance are based on by-section calculations, and thus might be referred to as “by-place
management”; target costing, on the other hand, is “by-goods management” because it is based on
by-product (category) calculation. Also, while the former focuses on the “accrual” of costs, the
If the accounting function is assumed as a given, it may be understood that this is a “dispersion” of the
accounting function among relevant sections; however, it should be noted that if an accounting function exists that
has been embedded into “each function,” then they are “integrated” within a certain “system” (target costing, etc.).
24
16
latter centers on “determination” of costs.25
Additionally, the former is a system for performing calculations based on decisions that have
already been made and, as such, is “putting the future in the past,” whereas the latter is a system of
“liberation from being controlled by past decisions,” and thus is regarded as a “junction between
the future and reality.” The important thing here is to determine how the “calculation of goods” and
“calculation of places” may be logically linked together, and how concrete individual activities
based on each of the two may be managed.
Furthermore, if life cycle (cost) analysis is applied not only to the product development
process but to the technological development process as well, it will become possible to enhance
cooperation between technological development and product development. Both of these serve as
nodes for perpetuating the PDCA cycle, which had previously been severed.
5. Global Costing Systems and the New Deployment of Target Costing
5.1 CCC21 and the EQ Committee
In 2000, Toyota launched a cost-reduction initiative designed to improve the cost-competitiveness
of its new products. This initiative was called Construction of Cost Competitiveness for the 21 st
Century, or CCC21. Its goal was to carry out a radical review of the target costing which had
hitherto revolved around “VA/VE” (value analysis and value engineering), by making it an
essential requirement to reduce costs by 30%. By abandoning all current assumptions and starting
from scratch, it set out to “strip costs completely naked.”
Previously, each production division’s costs at the factory level had been generally based on
the number of labor hours for the company as a whole: costs were apportioned according to the size
of the car, the number of units, and other factors, and in the case of maintenance costs and so forth,
apportionment was carried out in the same way for each model. This allocation procedure was
rejected on the grounds that it led to slipshod accounting.
This technique is now applied by Toyota’s suppliers, too. Under the slogan “halve materials
costs and processing costs,” teams have been formed, their members drawn from Toyota’s
purchasing, engineering and production divisions, and dispatched to work with the suppliers,
providing guidance through multiple channels.
The development project for the new Corolla, launched in 2002, features a 10-member “EQ
Committee” (EQ being the Corolla’s design code) comprised of an operational unit consisting of
deputy directors of all the departments involved, plus key executives from purchasing,
manufacturing, engineering and accounts: this committee implemented an “abandon all current
assumptions drive,” rethinking costs from scratch. CCC21 was designed to take the cost-cutting
initiative that had been so successful with the Corolla, and push it even further.
The procurement division, parts procurement division and materials and equipment
procurement division were unified with regard to the 173 individual parts that made up 90% of the
procurement cost. These departments were reorganized, changing over from a horizontal division
25 Activity-based costing (ABC) is also limited to the “accrual” of costs.
17
into model, parts and engineering phases, to a vertical division into production process phases.
Furthermore, the selection of construction methods and equipment tailored to the parts and
materials, and the procurement of the materials, molds and production equipment, was entrusted to
a single buyer. This initiative attained an average cost reduction of 30% (50% in the case of some
parts) over a 3-year period. When the savings were calculated, based on the procurement cost for
the accounting year to March 2000, which was 4.7489 trillion yen, they worked out at 1.34 trillion
yen.
5.2 From the differential cost to the absolute cost
Okano(2003) examines how target costing marks a clear departure from traditional management
accounting, and looked at a number of features of target costing, including the way it combines
market-oriented calculation (reverse calculation) with technology-oriented calculation, the way it
shifts the focus away from incurred cost toward committed cost, the fact that its calculation and
management systems are not location-specific or department-specific (i.e. person-specific), but
“thing-specific,” and the fact that it facilitates the simultaneous attainment of targets on multiple
fronts, including price, quality, delivery dates, efficiency, environmental soundness, and so forth.
In recent years, companies are increasingly transferring their production bases overseas.
Besides increasing the need to procure parts locally, this also means that manufacturers are obliged
to achieve even greater cost reductions on their domestically-produced parts, making it essential to
create a global costing system. Let us consider how the features of target costing are likely to
change in response to the globalization of corporate activities. We shall focus mainly on changes to
calculation systems.26
First, it is possible that there will be a shift away from “virtual calculation,” transcending
location, towards “substantive calculation,” in which the “location” and “people” dimensions are
bonded together. This is because, since the range of products made at overseas bases is restricted,
the profitability of the products is directly linked to the continued existence of the local business
entity itself. In other words, the difference between the cost concept before mass-production (i.e. at
the target-costing stage) and the cost concept after mass-production (i.e. at the cost-maintaining and
cost-kaizen stages) will become critical. The calculation process at the development stage and other
pre-mass-production stages and the calculation process after mass-production will become separate
self-contained processes, and the PDCA (plan-do-check-act) cycles will end up being implemented
separately, instead of being linked in terms of calculation (Okano 2002a).
In order to surmount these challenges, companies will have to switch from the differential
system to the absolute-value system. In traditional target costing, as has already been pointed out,
the emphasis has been placed on cost-unit management, with everything revolving around how
much the cost has fallen on the graph, while the improvement of new parts, the costs and rates for
26
Globalization is likely to affect management systems through trends in development organization, performance
evaluation systems, systems for promoting organizational learning in cooperation with suppliers, and even policy
management. Social systems will be affected by globalization in terms of contracts, employment practices,
education systems and other matters relating to the application of local systems.
18
carryover parts and other conditions have been fixed. The differential cost management system was
aimed at motivating the designers, and evaluating their efforts properly, by eliminating external
factors beyond their control.
However, it became difficult to attain challenging goals solely by means of graph-oriented
efforts, and the other fixed parameters consequently had an increasing effect on profitability. This
prompted a shift towards the absolute-value system--which uses absolute values instead of the
traditional differentials--when setting the target cost of a new product. As a result, target costing
has broadened its scope to include areas hitherto ignored, such as kaizen activities targeting
purchased parts--which are the responsibility of the procurement department--along with
improving production efficiency and reducing marketing costs and general administrative costs.
Another consequence of this change is that it is now possible to make provision cost data
comparisons at the design, production preparation and production stages, so it can be clearly shown
how much each stage contributes to the total cost. As a result, rough cost comparisons between
facilities in Japan and production bases overseas are now possible.
The return to a “location-specific” approach to calculation, however, will obscure the extent of
the negative impact on the precision of estimated costs and the relationship with VE, attained by
target costing using the technology-oriented approach previously established. This issue will be
addressed in future, including trends in the handling of accounting “invisibility” considered in
Okano (1995a).
As target costing systems move further towards becoming directly linked with human
resources evaluation system, engineers and purchasing staff move further apart in terms of target
cost. Conversely, companies could decide not to set individual-specific targets, in order to promote
cross-functional activities.
However, this is not to say that the transition from the differential system to the absolute-value
system will eliminate all problems. One problem that remains concerns the relationship between
the head office in Japan and the business entity overseas. In other words, despite the fact that an
overseas production base is in fact an investment center, in its relationship with the head office in
Japan, it will be treated as a cost center, and suppliers will also be seen as cost centers. In other
words, the perceptual gulf regarding the nature of the organizational structure will have a strong
influence on the separate specific activities involved in target costing, and this must be considered.
At this point, bearing in mind the relationship between organizational change and accounting
change, we need to consider how culture will influence these changes. 27 Demystifying differences
in accounting and management behavior could be said to produce a strong trend towards
convergence at points of cultural difference. However, as has been pointed out in the foregoing
consideration of cosmopolitanism, rather than merely “interpreting” organizational behavior caused
by a “single” cultural difference (like the one existing between Japan and America) in stereotypical
terms, we need to lay bare the issues hitherto overlooked in the name of “cultural differences.” As
27
The word “culture” is used here to indicate the composite aggregation of those capacities and manners acquired
by a human being as a member of a society, such as knowledge, beliefs, art, religion, morality, law, customs and so
forth.
19
well as understanding cultures in a multicultural situation, we need to do away with the word
“culture” as far as possible, and re-interpret those problems from a different perspective, bringing
to light the aspects of culture that were formerly buried.
In 1999, Toyota set up a Committee for the Promotion of Local Procurement 28, and local
procurement of parts has since been carried out in five phases--by task forces for the “project
phase,” the “parts & components phase,” the “supplier phase” and the “material phase,” plus the
“management system phase” whose function is to ensure that the other phases become firmly
established. In other words, this can be seen as an attempt to implement the kind of
cross-functional management system we studied in Chapter 1, which is not confined to the
“project-specific” approach of traditional target costing, which is spearheaded by the design team
and staff at overseas business departments, but instead takes the form of various phases. The new
system starts with the “parts & components phase” spearheaded by the technical research staff, and
passes through the “supplier phase” spearheaded by procurement staff, the “material phase”
spearheaded by engineering (or design) staff, and the “management system phase” spearheaded by
production and logistics staff.29
6. Conclusion
By taking a close look at changes in recent years, one can see that as time passes things move
through a repeated cycle of “adaptation” and “metamorphosis,” rather than “progress” or
“evolution” (Mayer, et al. 1990). In the following paragraphs, the author would like to discuss the
“adaptation” and “metamorphosis” (i.e., transformation) of the basic unit, rate, and measurement of
target costs (difference or absolute value).
First of all, concerning the fact that target costing deals with the product of the basic unit 30
(physical unit) and the rate, the ways in which costs may be assessed can vary depending on
function, experience, and culture. It would thus be necessary to have a system that serves as a form
of logic to divide work among members of a product development team and integrates different
realities (what is happening at the shop floor) based on the “shop-floor-first principle,” namely, a
system and form of logic that visualize all of this and overcome the “invisibility of accounting”
(Okano 1995a). The basis of this is a technical perception of costs; in other words, target costing
involves activities to reduce the basic unit itself through improvement of design drawings by
design engineers (e.g. reducing the number of shots of spot welding). On the other hand, capital
28
Toyota has created offices for the promotion of localized procurement in the form of the Global Procurement
Planning Department, Planning Department No.1 (within Development Center No.1), Planning Department No.2
（Development Center No.2）, the Overseas Engineering Department and the Global Production Planning
Department. The membership of the Committee consists of representatives of the regional business entity for each
project (in Europe, North America, Asia & Oceania, the Middle East, South Africa and South America), plus
“functional” representatives (for design, materials technology, logistics and so forth).
29 Moreover, in Okano 1996 and 2002a, three approaches to strategic target costing are presented. These are (1)
target costing as a comprehensive product strategy management system (target costing by product group), (2) target
costing as an engineering strategy management system (technology-oriented target costing), and (3) target costing
as a production engineering management system (factory target costing, an organic bonding of cost maintaining and
kaizen costing).
30 For a practice that emphasized basic units toward the end of WWII, see Okano (2006a). This is closely related to
the aforementioned multi-layered structure of culture.
20
expenditure planning involves activities for reducing the cost per basic unit by lowering the rate
through efficient operation of equipment and other means (e.g., reducing costs per shot through
common use of equipment and efficient use of existing equipment), and the leading roles are
played by production engineers.
As discussed earlier, the separation between target costing and capital expenditure planning
accelerated after the onset of the 1980s, but as globalization and competition have intensified in
recent years, this separation is now being re-examined. In other words, target costing has become
increasingly necessary as a comprehensive management activity concerned with company-wide
product development, and overlap with cost improvement and cost maintenance has become a vital
issue.
At the same time, cost cutting in the style of Nissan CEO Carlos Ghosn underlines lowering of
the rate, but this approach does not appreciate in a relative sense the other element, namely, the
technical initiative to reduce the “basic unit” by improving drawings.
With regard to the issue of a cost category, i.e., whether to use the difference between the
current model and the next new model or the absolute cost of the new model, in some cases cost
items are limited throughout the entire process from development to preparation for mass
production (as at Toyota Motor, where cost items are limited to design costs and manufacturing
costs) and cost category are added as the development stages progress. This difference occurs
because a cost engineering approach comes to the fore in one case and a purchasing perspective
takes precedence in the other.
As competitive conditions changed and globalization developed further, Toyota shifted its
focus in 2000 from the difference to absolute value, but more recently they seem to be discussing
whether or not a change should be made back to the difference. This is certainly evidence that
things are changing as the cycle of “adaptation” and “metamorphosis” continues to be repeated.
This paper has dealt with target costing in order to detail the present state of Japanese
management accounting by taking note of the history of practice in describing historical continuity
and discontinuity. The author concludes that it is important to discover one’s own identity by taking
note of the interpenetration of historical continuity and discontinuity (changes) to locate new
possibilities in history, while at the same time focusing on the composition of Japan’s multi-layered
“culture.”
21
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