Integrating Target Costing and Time-Driven Activity-Based Costing to Determine Strategic Product Cost: An Applied Study in the Syrian Pharmaceutical Industry

Abstract

This study examines how target costing (TC) and time-driven activity-based costing (TDABC) complement each other, and whether their combined use can yield a strategic product cost that supports a firm's competitive position where competition turns on price. It draws on the literature and on an applied study at the Arab Medical Company (Tamico), using 2019 cost data for Cetamol tablets. Tablet cost was measured under the company's traditional costing system and under TDABC, and both figures were compared with a target cost derived from the competing product's price and the set profit margin. The target cost of a tablet was SYP 5.20. Its cost was SYP 5.4909 under the traditional system, 5.6% above the target, and SYP 4.805 under TDABC, about 7.6% below it. The gap between the two measurements arises mainly from the work in process carried into the year and from the different basis of assigning conversion costs, not from an actual reduction in cost. Automatic packaging and manual filling account for about 87% of the conversion cost of a tablet, and about 31% of the conversion resources of the four departments were not consumed by the product. The conclusion holds at a practical capacity of 80%. Combining the two gives management a cost target from the market, a cost measure from the actual consumption of resources, and an indication of where cost can be reduced. It recommends introducing the integration in stages and directing cost reduction at the departments that consume the most time.