Application of Target Costing in the Controlling System of an Agricultural Organization

Abstract

Nowadays, different food consumption trends determine the functioning of food supply chains. Responding efficiently and quickly to trends provides businesses with a strong competitive advantage. This competitive advantage does not necessarily lie in responding to a particular trend, but in the agility of businesses. Among the various trends, the emergence of animal welfare in the consumer preference of food products should be highlighted. Responding to this poses a complicated and complex challenge to producers. Consumers ’willingness to pay and changing attitudes are the two factors that can be examined in this challenge. Increasing the level of animal welfare on livestock farms is a fundamentally investment-intensive and cost-increasing factor. Choosing a better husbandry from an animal welfare point of view and analyzing the cost of this can be a kind of key in planning and implementation. During this planning, the methodology of target cost calculation can be used as an explicitly effective method. This methodology performs cost analysis based on consumer value judgments and organizational predefined profit margins. In our study, we illustrate the possible application of the target cost calculation methodology in the framework of an extended case study when changing the possible husbandry of a poultry farm. In our research, we point out that a change in lifestyle is not necessarily profitable, and not all consumer groups are able and willing to pay the extra costs of a lifestyle.