To understand the ways in which we understand the fuzzy logic related to target costing and hence make better decisions based on the same which will help in increasing the profitability and also help in determining apt selling price for a product.
Target Costing: The methodology of target costing was first developed and used by Japanese automobile industry. This was used to help the decision making and selling of new products, as well as analyzing the product costs and the marginal returns from each product. It has also been stated in this article that according to Cooper and Kaplan (1998) the essence of target costing can be divided into three major parts which is given as follows:
Allow the market to establish the selling price of the product
Determined and subtract the product margin or the profit required by the company for that particular product
The difference of the above two will give us our resultant or the required target costing.
The above statements can be represented in the following equation format:
Target Costing = Sale Price – Required Return
Fuzzy Logic: The concept of fuzzy logic came into existence due to inadequacy of the binary logic to serve certain logical situations where either true or false cannot be the answer. The binary logic was formulated initially by Aristotle (384 – 322 A.C.), the Greek philosopher with a proposition of either being true or false. This type of logic can be used in the situations where the nature of the problem and the events are very well defined, but this may not be true for many real life scenarios specially in of accounting and business areas cases, the events are vague and the outcomes cannot be clearly defined as true or false. Transitions lies betwe...
... middle of paper ...
...prices, costs and other essential variables required for proper decision making.
Comments and learning:
The learning that can be taken from this research paper is as follows:
This has helped us in understanding the flaws of the traditional binary modeling concept.
This has helped us in understanding the value of fuzzy logic in different segments of accounting, costing and finance as an alternative option for decision making.
It also gave an insight about how implementation of fuzzy logic can be used to deal with the uncertainties of the real life scenarios.
It has also given us the knowledge that for determining the most profitable business not only the cost price, selling price and profit per unit is important but the volume of production can also make sea changes assuming that other administrative expenses remain constant for all other possible products.