Chapter 5

Relevant Information and Decision

Making:
Marketing Decisions

LEARNING OBJECTIVES:
When your students have finished studying this chapter, they should be
able to:

1. Discriminate between relevant and irrelevant information for

making decisions.

2. Use the decision process to make business decisions.

3. Decide to accept or reject a special order using the contribution

margin technique.

4. Decide to add or delete a product line using relevant information.

5. Compute a measure of product profitability when production is

constrained by a scarce resource.

6. Discuss the factors that influence pricing decisions in practice.

7. Compute a target sales price by various approaches and compare

the advantages and disadvantages of these approaches.

8. Use target costing to decide whether to add a new product.

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9. Understand how relevant information is used when making
marketing decisions.

74
CHAPTER 5: OVERVIEW
This chapter begins a two-chapter sequence on relevant information and
its use in decision making.

Section One: Defines relevance, discusses the trade off of relevance

versus accuracy, and provides two examples of
determining relevant costs for decision making.

Section Two: Illustrates the determination of relevant costs in a

special order decision. The utility of the contribution
format of the income statement is demonstrated, while the
potential hazards of using full absorption costing for this
type of decision is also shown. Also, the benefits of
identifying and using multiple cost drivers are presented.

Section Three: Examines the role of relevant costs in deletion or

addition of product or department decisions. One of the
keys to this type of analysis is to identify fixed costs as
avoidable and unavoidable. Alternative uses of facilities
should be considered when analyzing product or
department deletions.

Section Four: Focuses on the optimal use of limited resources. In

utilizing limited or scarce resources, it is important to
produce those products that provide the highest
contribution margin per unit of the scarce or limited
resource.

Section Five: The role of costs in pricing decisions is presented. The

role of costs in perfect and imperfect competition are
explained and contrasted. Typically, obtaining the
maximum total contribution margin is the goal.

Section Six: The general influences of costs on pricing in practice are

presented. Legal requirements, competitors' actions, and
costs combine to influence price setting in practice. In
some cases, a target-selling price is set (either to obtain
some desired profit or based on what customers will pay
for the product), and markups based on different
definitions of cost are determined.

Section Seven:Examines the advantages and disadvantages of the

contribution approach to pricing, the absorption-cost
approach to pricing, and the full-cost approach to pricing.

75
Section Eight: Presents target costing and its proactive planning
throughout every activity of a new product development
process. There is a strong emphasis on understanding
customer needs. Target costing and cost-plus pricing are
compared.

76
CHAPTER 5: ASSIGNMENTS
COGNITIVE EXERCISES

24 Fixed Costs and the Sales Function

25 The Economics of the Pricing Decision
26 Pricing Decisions and the Law
27 Target Costing and the Value Chain

EXERCISES

28 Pinpointing of Relevant Costs

29 Information and Decisions
30 Identification of Relevant Costs
31 Special-Order Decision
32 Unit Costs and Total Costs
33 Advertising Expenditures and Nonprofit Organizations
34 Variety of Costs Terms
35 Profit per Unit of Space
36 Deletion of Product Line
37 Acceptance of Low Bid
38 Pricing by Auto Dealer
39 Pricing to Maximize Contribution
40 Target Selling Prices
41 Competitive Bids
42 Target Costing
43 Target Costing

PROBLEMS

44 Pricing, Ethics, and the Law

45 Pricing and Contribution Technique
46 Cost Analysis and Pricing
47 Pricing of Education
48 Videotape Sales and Rental Markets
49 Use of Passenger Jets
50 Effects of Volume on Operating Income
51 Pricing at The Grand Canyon Railroad (Business
First)
52 Pricing of a Special Order
53 Pricing and Confusing Variable and Fixed Costs
54 Demand Analysis
55 Choice of Products
56 Analysis of Unit Costs
57 Use of Available Facilities

77
 58 Target Costing
59 Target Costing Over Product Life Cycle
CASES

60 Use of Capacity

COLLABORATIVE EXERCISE

61 Understanding Pricing Decisions

62 Internet Exercise

78
CHAPTER 5: OUTLINE

I. The Concept of Relevance {L. O. 1}

Whether information is relevant depends on the decision to be
made. Accountants assist managers in making decisions by
collecting and reporting relevant information.

A. Relevance Defined

Relevant Information - the predicted future costs and

revenues that will differ among alternatives. Although past
data may be helpful in predicting future costs and revenues,
past data is irrelevant in making future decisions.

B. Examples of Relevance {L. O. 2}

The authors provide two examples of the need for deciding
relevant costs (i.e., which gas station to select to fill your tank
and get the car lubricated, and the choice of materials for
making a line of ashtrays). The expected future costs that
differ between alternatives are the relevant costs to be used
in selecting from the competing alternatives.

See EXHIBIT 5-1 for an illustration of the decision process

and the role of information in the process. Historical data
from the accounting system is combined with other data from
outside the accounting system to formulate predictions. The
predictions are then input into a Decision Model (i.e., any
method used for making a choice) in order for a decision to be
made.

C. Accuracy and Relevance

Accountants often trade off relevance versus accuracy.

Precise but irrelevant information is worthless for decision
making. Imprecise but relevant information can be quite
useful. Qualitative (i.e., measurement in monetary terms is
difficult and imprecise) information can be as important or
more important than quantitative information.

79
II. The Special Sales Order {L. O. 3}
A. Illustrative Example

See EXHIBIT 5-2 for the contribution income statement of

the Cordell Company. They examine whether a special order
offered at $26 per unit received near year-end from a mail-
order house should be accepted. The order would (1) not
affect regular business, (2) not raise antitrust issues regarding
price discrimination, (3) not affect total fixed costs, (4) not
require additional selling and administrative expenses, and (5)
use some otherwise idle manufacturing capacity.

B. Correct Analysis - Relevant Information and Cost

Behavior

See EXHIBIT 5-3 for the correct analysis using the

contribution format income statement. The only relevant
items are the increased revenues ($2,600,000) and increased
costs ($2,400,000) associated with the special order. While
they may be included in the analysis, fixed costs that do not
differ between alternatives are irrelevant.

C. Incorrect Analysis - Misuse of Unit Cost

Misinterpreting fixed unit costs may cause a manager to

decide that a special order results in a bad decision due to a
mistreatment of the fixed manufacturing costs (i.e., treating
them as variable).

D. Confusion of Variable and Fixed Costs

The $6 of fixed manufacturing cost per unit included in the

$30 per unit manufacturing cost used in the incorrect analysis
creates the flaw in the analysis. Total fixed costs will remain
at $6,000,000 regardless of whether 500,000 or 1,000,000
units are produced as long as both levels of activity are within
the relevant range.

E. Activity-Based Costing, Special Orders, and Relevant

Costs

Businesses that have identified all their significant cost

drivers can predict the effects of special orders more
accurately. The Cordell Company example is extended to
80
indicate that, of the $24,000,000 of variable manufacturing
costs expected for the production of 1,000 units of product,
$18,000,000 varies directly with units produced and
$6,000,000 varies with the number of setups. The
profitability of the special order for 100,000 units would now
depend on the number of setups necessary for its production.
Two levels are examined with one showing that the order
would be profitable and the other showing that it would
decrease profits.

81
III. Deletion or Addition of Products, Services or
Departments {L. O. 4}
The same principles regarding relevance applied to special orders
apply to decisions concerning adding or deleting products or
departments. The example provided in this section is whether to
drop the grocery line from the offerings of a discount department
store that has three major departments: groceries, general
merchandise, and drugs. Fixed expenses are divided into two
categories, avoidable and unavoidable.

In the initial analysis, the grocery line is kept because it provides a

contribution over its avoidable fixed costs of $50,000. After
analyzing whether to keep or drop the grocery line, the analysis is
extended to consider replacing groceries with expanded general
merchandise. When this alternative is considered, however, the
proper decision is to expand general merchandise because this
option contributes $140,000 rather than $50,000 toward covering
common and other unavoidable costs.

Avoidable Costs - will not continue if an ongoing operation is

changed or deleted. These costs are relevant in making the
decision.

Unavoidable Costs - will continue even if an operation is halted.

These are not relevant because they will not differ between
alternatives. Unavoidable costs may include Common Costs -
costs of facilities and services that are shared by users (e.g.,
building depreciation, heating, air conditioning, and general
management expenses).

IV. Optimal Use of Limited Resources {L. O. 5}

If a plant that makes more than one product is being operated at
capacity, the orders to accept are those that make the biggest total
profit contribution per unit of the limiting factor. Limiting Factor
or Scarce Resource - an item that restricts or constrains the
production or sale of a product or service. For example, in retail
sales, the limiting resource is often floor space. Thus, retail stores
must either focus on products using less space or using the space
for shorter periods of time (i.e., greater Inventory Turnover -
number of times the average inventory is sold per year). Do not
emphasize those products that give the largest contribution per
sales dollar or per unit of product. See EXHIBIT 5-4 for the effect

82
of turnover on profit.

83
V. Pricing Decisions

Pricing decisions must be made regarding setting the price of a new

product, setting the price of products sold under private labels,
responding to new prices of competitors, and in pricing bids. Costs
play a major role in these decisions.

A. The Concept of Pricing

Pricing decisions depend on the characteristics of the market

a firm faces. In Perfect Competition there is a single
market price and a single product. The only decision for
managers is how much to produce. In perfect competition,
companies should produce up to the point where their
Marginal Cost (i.e., the additional cost resulting from
producing and selling one additional unit) is equal to a
constant Marginal Revenue (i.e., the additional revenue
resulting from the sale of an additional unit. See EXHIBIT 5-
5 for the marginal revenue and cost in perfect competition.

Imperfect Competition - a firm's price will influence the

quantity it sells. The price of all units sold must be reduced in
order to sell additional units. See EXHIBIT 5-6 for the
demand and marginal revenue curves for the case of
imperfect competition. See EXHIBIT 5-7 for the
determination of the profit maximizing level of sales in
imperfect competition.

In economic theory, the marginal cost is relevant for pricing

decisions. Variable cost is the accountant's approximation of
marginal cost. Variable cost is assumed to be constant within
a relevant range of volume. However, marginal cost
increases with each unit produced. The increases in marginal
cost are often small within large ranges of production volume,
and a reasonable approximation of marginal cost in many
situations.

B. Pricing and Accounting

Managers rarely compute marginal revenue and marginal cost

curves. Rather, they use estimates based on judgment to
predict the effects of additional production and sales on
profits. They also look at selected volumes rather than the
whole possible range of volumes. An example of a pricing
decision for microwave ovens demonstrates that comparing

84
contribution margins of alternatives is equivalent to
comparing the additional revenues, costs, and profits of the
alternatives when volumes of activity under consideration are
within the relevant range within which fixed costs are
unaffected.

85
VI. General Influences on Pricing in Practice {L. O.
6}
Legal requirements, competitors actions, costs, and customers'
demands all influence pricing.

A. Legal Requirements

Predatory Pricing (illegal) - a company establishes prices

so low that competitors are driven out of the market so that
the predatory price has no significant competition and the
company can then raise prices dramatically. Pricing below
average variable cost has been viewed by U.S. courts as
predatory pricing. Prices cannot be set in collusion with other
firms in an industry.

Discriminatory Pricing - charging different prices to

different customers for the same product or service. It is
illegal unless it reflects a differential incurred in providing the
good or service. Both predatory pricing and discriminatory
pricing charges can be defended by a company that cites its
costs as a basis for its prices.

B. Competitors' Actions

Competitors usually react to price changes of their rivals.

Knowledge of their rival's capacity, technology, and operating
policies help managers predict competitors' reactions to a
company's prices. Tinkering with prices is based on the price
setter's expectations of competitors' reactions and of the
overall effects on total industry demand for the good or
service in question.

C. Customer Demands

If customers believe a price is too high, they may turn to

other resources for the product or service, substitute a
different product, or decide to produce the item themselves.

VII. Role of Costs in Pricing Decisions

A. Cost-Plus Pricing

In some industries, such as agricultural commodities, costs

86
have little or no effect on the setting of prices. In others, such
as the automobile industry, managers use costs as a base in
cost-plus pricing. The Markup (i.e., the amount by which
price exceeds cost) is originally set to provide a target return
on investment, but must be flexible in order to meet market
demands (e.g., defense contracting). Ultimately, the market
sets prices.

87
 In The Short Run, the minimum price to be quoted, subject
to consideration of long-run effects, should be equal to the
costs that may be avoided by not landing the order - often all
variable costs of producing, selling, and distributing the good
or service. In The Long Run, the price must be set high
enough to cover all costs, including fixed costs.

B. Cost Bases for Cost-Plus Pricing

Cost plus is often the basis for target prices. The size of the
"plus" depends on target (desired) operating income. Target
prices can be based on a host of different markups based on a
host of different definitions of cost. These bases include
variable manufacturing costs, total variable costs, full
absorption manufacturing costs, and full costs. Thus, there
are many ways to arrive at the same target price. See
EXHIBIT 5-8 for an illustration. Note that Full Cost (or Fully
Allocated Cost) is the total of all manufacturing costs plus
the total of all selling and administrative costs.

Because managers' performance evaluations and bonuses are

frequently based on absorption costing income, markups
based on full absorption costs are prevalent.

C. Advantages of Contribution Approach in Cost-Plus

Pricing {L. O. 7}

Prices based on variable costs represent a contribution approach

to pricing. Full absorption costing fails to highlight different cost
behavior patterns. The contribution approach is sensitive to cost-
volume-profit relationships which makes it easier for managers to
prepare schedules at different volume levels. See EXHIBIT 5-9
for examples of using the contribution approach and full costing
approach for analyzing the effects of volume changes on
operating income.

A normal or target-pricing formula can be developed as easily

using variable costs as full absorption or full costs. The
contribution approach offers insight into the short-run versus long-
run effects of cutting prices on special orders. The manager can
consider whether the increase in operating income (contribution
margin) generated from a special order outweighs potential
reductions in long-run profitability due to expectations of lower
prices by customers. If a company is using full absorption costing,
a manager must conduct a special study in order to make the
special order decision.

88
D. Advantages of Total-Manufacturing-Cost and Full-Cost
Approaches in Cost-Plus Pricing

Absorption or full costs are far more widely used in practice

than is the contribution approach. The following are some of
the reasons offered:

1. In the long run, all costs must be covered to stay in

business. Sooner or later fixed costs do indeed fluctuate
as volume changes. Therefore, it is wise to assume that
all costs are variable (even if some are fixed in the short
run).

2. Computing target prices based on cost-plus may

indicate what competitors might charge, especially if
they have approximately the same level of efficiency as
you and also aim at recovering all costs in the long run.

3. Total-manufacturing-cost or full-cost formula pricing

meets the cost-benefit test. It is too expensive to
conduct individual cost-volume tests for the many
products (sometimes thousands) that a company offers.

4. There is much uncertainty about the shape of the

demand curves and the correct price-output decisions.
Absorption-cost or full-cost pricing copes with this
uncertainty by not encouraging managers to take too
much marginal business.

5. Total-manufacturing-cost or full-cost pricing tends to

promote price stability and planning is more
dependable.

6. Total-manufacturing-cost pricing or full-cost pricing

provides the most defensible basis for justifying prices
to all interested parties, including government antitrust
investigators.

7. Total-manufacturing-cost or full-cost pricing provides

convenient reference (target) points to simplify
hundreds of thousands of pricing decisions.

E. Using Multiple Approaches

No single method of pricing is always the best. Most

89
companies have gathered costs using some form of full-
manufacturing-cost system because this is what is required
for financial reporting. Managers are reluctant to focus just
on variable costs when their bonuses are based on income
shown in published financial statements which must use
absorption costing.

90
 F. Formats for Pricing

See EXHIBIT 5-10 for an illustration of a quote sheet to be

used in pricing. A minimum price based on variable costs and
a maximum price based on what the company thinks it can
obtain are shown. Construction and service industries (e.g.,
as auto repair) compile separate categories of costs of (1)
direct materials, parts, and supplies and (2) direct labor.
Different markup rates are used for each category to assure
the recovery of direct costs, overhead costs, and to provide
for profits. For decision-making purposes, it may be more
beneficial to pinpoint costs first, before adding markups, than
to have a variety of markups already embedded in the "costs"
used as guides for setting selling prices.

VIII. Target Costing

The focus is on marketing and the revenue side of the profit

equation.

A. Target Costing and New Product Development

{L. O. 8}
Target Costing - a tool for making cost a key focus
throughout the life of a product (i.e., the desired profit
margin is subtracted from the market price to determine the
target cost). The emphasis is on proactive, up-front planning
throughout every activity of the new product development
process. It is most effective as reducing costs during the
product design phase, when the vast majority of costs are
committed. Market research guides the whole product
development process by supplying information on customer
required product functions. There is a strong emphasis on
understanding customer needs (see EXHIBIT 5-11). Value
engineering is a cost-reduction technique, in primarily the
design stage, which uses information about all value chain
functions to satisfy customer needs while reducing costs.
Kaizen costing is continuous improvement during
manufacturing

B. Target Costing and Cost-Plus Pricing Compared

A comparison is shown in relation to an automotive part bid.

91
As global competition has increased, companies are more
limited in influencing market prices. Cost management is
the key to profitability.

TEACHING TIP: Internet Site target costing:

http://www.aicpa.org/cefm/ma/index.htm
(Advanced Management Practices and Processes
Implementing Target Costing)

92
CHAPTER 5: TRANSPARENCY MASTERS
The following exhibits are reproduced as transparency masters at the end
of this manual:

Exhibit 5-1 Decision Process and Role of Information

Exhibit 5-2 Contribution Form of the Income Statement:

Cordell Company

Exhibit 5-3 Comparative Predicted Income Statements,

Contribution Technique: Cordell Company

Exhibit 5-5 Marginal Revenue and Cost in Perfect Competition

Exhibit 5-6 Marginal Revenue and Cost in Imperfect

Competition

Exhibit 5-7 Profit Maximization in Imperfect Competition

Exhibit 5-8 Relationships of Costs to Same Target Selling

Prices

Exhibit 5-9 Analyses of Effects of Changes in Volume on

Operating Income

Exhibit 5-10 Quote Sheet for Pricing

Exhibit 5-11 The Target Costing Process

93
CHAPTER 5: Quiz/Demonstration
Exercises
Learning Objective 1

1. In making managerial decisions, irrelevant information is

everything but

a. future costs that do not differ between alternatives.

b. future costs that differ between alternatives.
c. past costs that do not differ between alternatives.
d. past costs that differ between alternatives.

2. For a revenue to be relevant to a particular decision, the revenue

must:

a. differ between the alternatives being considered

b. be a past revenue
c. be a future revenue
d. a and b
e. a and c
f. only c

Learning Objective 2

3. The role of historical data from the accounting system in making

managerial decisions is

a. to serve directly as inputs in decision models.

b. to assist in making predictions about other information
needed for making decisions.
c. to assist in making predictions that are inputs to a decision
model.
d. none of the above.

4. What is the last portion of the decision process?

a. feedback
b. prediction method
c. implementation and evaluation
d. decision model

94
Learning Objective 3

Use the following information for questions 5 and 6.

Look-N-Cook sells uncooked pies that can be heated at home and

taste delicious. An income statement for a typical month is given
below.

Sales (5,000 pies) $ 50,000

Costs:
Ingredients $ 19,000
Direct Labor 6,000
Overhead (50% variable) 20,000 45,000
Before-tax Income $ 5,000

A local car dealer, who loves Look-N-Cook pies, has offered to buy
300 pies for an upcoming promotion to launch the new SPEEDY line
of sports cars he will carry. While the normal selling price is $9 per
pie, the dealer has offered $6 each citing the large volume of the
order as the reason for cutting the price.

5. If Look-N-Cook accepts this order, the effect on the company's

income, assuming regular sales are unaffected, is a

a. $900 decrease. b. $900 increase.

c. $300 decrease. d. $300 increase.

6. The fixed overhead of $2 per pie

a. is irrelevant in making the decision because the total fixed

costs are unaffected.
b. is irrelevant in making the decision because the fixed costs
per unit are unaffected.
c. will increase to above $2 per pizza if the order is accepted.
d. will increase to above $2 per pizza if the order is not
accepted.

95
Learning Objective 4

Use the following information in answering questions 7 and 8.

ShoppingKart, Inc. is a supermarket having three operating

departments. An income statement for the most recent month of
operations appears below.

General Meat Produce

Total

Sales $50,000 $40,000 $10,000 $100,000

Variable Costs 30,000 16,000 5,000 51,000
Contribution Margin 20,000 24,000 5,000
49,000
Fixed Costs
Direct, avoidable (5,000) (4,000) (3,500)
(12,500)
Common, allocated based
on sales dollars (10,000) (8,000) (2,000)
(20,000)
Profit (Loss) $ 5,000 $12,000 ($ 500) $
16,500

7. If ShoppingKart, Inc. were to drop the produce line and make no

other changes to its operations, income for the month would be

a. $ 12,000 b. $ 15,000 c. $ 16,000

d. $ 17,000

8. The space currently being used by the produce department could

be converted to a deli department. If this were done, sales of the
deli are expected to be $20,000 with variable costs of $8,000 and
avoidable direct fixed costs of $3,000. Assuming no effects on the
general grocery and meat departments, income for the month
would be

a. $ 23,500 b. $ 24,000 c. $ 24,500

d.some other amount

96
Learning Objective 5

9. When a multi-product plant is being operated at capacity, the

products which should be emphasized are those that provide

a. the highest contribution margin ratio.

b. the highest contribution margin per sales dollar.
c. the highest contribution margin per unit of product.
d. the highest contribution margin per unit of the limited
resource.

10. Which of the following is NOT a scarce resource of a company or

firm?

a. laborers
b. floor space
c. time
d. customers

Learning Objective 6

11. influence(s) pricing decisions.

a. Costs
b. Customer demands
c. Competitors actions
d. All of the above

12. Which of the following legal requirements influences pricing in

practice?

a. predatory pricing
b. competitive pricing
c. nondiscriminatory pricing
d. markup pricing

Learning Objective 7

13. Based on the information provided for questions 5 and 6, the

markup based on variable manufacturing costs to earn the $11,000
monthly profit is

a. 22.82% b. 31.33% c. 42.86% d. 50.9%

97
14. Popular markup formulas for pricing do not include:

a. a percentage of variable manufacturing costs

b. a percentage of total variable costs
c. a percentage of variable overhead
d. a percentage of full costs

Learning Objective 8

15. The majority of costs are committed in which stage of the value
chain:

a. design
b. research and development
c. production
d. customer service

16. A factor not usually included in determining the feasibility of

earning the desired target profit margin is:

a. depreciation
b. competitor pricing
c. inflation rates
d. interest rates

98
CHAPTER 5: Solutions to
Quiz/Demonstration Exercises
1. [b] 2. [e] 3. [c] 4.
[a]

5. [c] The solution to this problem requires determining the

variable cost per pies and comparing those to the offer price.
In this case the variable costs are $19,000 for ingredients,
$6,000 for direct labor, and $10,000 for variable overhead
(1/2 of $20,000) for a total of $35,000. For 5,000 pies, this is
a variable cost per pie of $7.00 ($35,000/5,000). Since the
offer is for $6 per pie, each pizza will subtract $1.00 in
contribution margin and profits will decrease by $300.

6. [a] Total fixed costs should be used in comparing the

alternatives. If the totals do not differ, fixed costs are
irrelevant for the decision at hand.

7. [b] Income statements for answering 7 and 8 appear below.

8. [b] Income statements for answering 7 and 8 appear below.

Keep Drop Add

Produce Produce Deli
Sales $100,000 $90,000 $110,000
Variable costs 51,000 46,000 54,000
Contribution margin 49,000 44,000 56,000
Fixed costs:
Direct (12,500) (9,000) (12,000)
Common (20,000) (20,000) (20,000)
Profit (loss) $ 16,500 $15,000 $ 24,000

The reduction in the contribution margin exceeds the

reduction in the direct fixed costs and the produce line should
be kept if not considering adding the deli. For #8, the deli
department provides a $7,500 higher segment margin than
the produce line so it should replace produce.

9. [d] 10. [d] 11. [d] 12.

[a]

99
13. [c] The total variable costs are $22,000 as was computed in the
solution to question 5. Sales of $50,000 represent a 42.86%
markup based on variable manufacturing costs since the
markup is $15,000 on $35,000 of costs ($15,000/$35,000 x
100% = 42.86%).

14. [c] 15. [a] 16. [a]

100
CHAPTER 5: SUGGESTED READINGS

Balachandran, B. V., R. Balakrishnan and K. Sivaramakrishnan. On the

Efficiency of Cost-Based Decision Rules for Capacity Planning, The
Accounting Review, October 1997, 599-619.

Banham, R. "Off Target? (Implementation of Target Costing), CFO, The

Magazine for Senior Financial Executives, May 2000, v.16 i.6, p.
127.

Bayou, M. E. and A. Reinstein. Formula for Success: Target Costing for

Cost-Plus Pricing Companies, Journal of Cost Management,
September/October 1997, 30-34.

Boer, G. and J. Ettlie. "Target Costing Can Boost Your Bottom Line",
Strategic Finance, July 1999, v.81 i.1, p. 49(5).

Burrows, G. H. "Allocations And Common Costs In Long-Run Investing And

Pricing Decisions: An Historical Analysis," Abacus, 1994, v30 (1),
50-64.

Cotton, W. D. J. "Relevance Regained Downunder," Management

Accounting, May 1994, 38-42.

Ellram, L. "Purchasing and Supply Management's Participation in the

Target Costing Process", Journal of Supply Chain Management,
Spring 2000, v.36 i.2, p. 39.

Fisher, J. Implementing Target Costing, Journal of Cost Management,

Summer 1995, 50-59.

Gron, A. and D. Swenson. "Cost Pass-Through in the U.S. Automobile

Market", Review of Economics and Statistics, May 2000, v.82 i.2, p.
316.

Hansen, S. C. Cost Analysis, Cost Reduction and Competition, Journal

of Management Accounting Research, Vol. 10 1998, 1-26.

Kaplan, R. S., J. K. Shank, C. T. Horngren, G. Boer, W. L. Ferrara, and M. A.

Robinson. "Contribution Margin Analysis: No Longer
Relevant/Strategic Cost Management: The New Paradigm," Journal
of Management Accounting Research, Fall 1990, 1-32.

101
Kato, Y., G. Boer and C. W. Chow, Target Costing: An Integrative
Management Process, Journal of Cost Management, Spring 1995,
39-51.

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