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Impact of Target Costing Knowledge on Students’ Ability to Evaluate Product Pricing Decisions in Nigerian Polytechnics

Abstract

This study examined the impact of target costing knowledge on students’ ability to evaluate product pricing decisions in Nigerian polytechnics. Target costing knowledge refers to students’ understanding of the principles and techniques used to determine the allowable cost of a product based on its expected market price and desired profit. Product pricing decision-making involves students’ ability to analyze cost and market information, assess alternative prices and determine appropriate selling prices for products. The study was motivated by the importance of target costing in modern cost management and the need for Accounting Education students to develop practical skills for evaluating pricing decisions. Target costing provides a market-oriented approach to cost management by considering the price customers are willing to pay and the profit a business expects to achieve before determining the allowable cost of a product. Students with adequate knowledge of target costing may therefore be better equipped to evaluate pricing alternatives and understand the relationship between product cost, selling price and expected profit. The study consequently investigated whether target costing knowledge has a significant impact on students’ ability to evaluate product pricing decisions in Nigerian polytechnics. Target costing is an important management accounting technique because it integrates cost considerations with market-based pricing decisions. Knowledge of target price, target profit and target cost can help students understand how businesses determine the maximum cost that can be incurred while still achieving the desired level of profit. Students who understand these concepts may be better able to evaluate whether a proposed product price is financially realistic and whether the estimated product cost is consistent with the expected profit. Target costing knowledge can also help students recognize the importance of controlling product costs during the design and production stages rather than relying only on cost information after production has taken place. This knowledge is particularly relevant to Accounting Education students because it connects cost accounting principles with product pricing, cost management and business decision-making. The study adopted a survey research design. The population comprised Accounting Education students in selected Nigerian polytechnics, from which an appropriate sample was selected using a suitable sampling technique. Data were collected through a structured research instrument designed to measure students’ target costing knowledge and their ability to evaluate product pricing decisions. Target costing knowledge was examined in relation to students’ understanding of target price, target profit, target cost, allowable cost, cost reduction and market-oriented costing. Students’ ability to evaluate product pricing decisions was considered in terms of their capacity to assess proposed selling prices, determine allowable product costs, compare pricing alternatives, evaluate expected profit and identify the cost implications of different pricing decisions. The instrument was validated by experts in Accounting Education and related fields, while appropriate reliability procedures were used to establish its consistency. Data were analyzed using descriptive statistics such as frequency, percentage, mean and standard deviation, while an appropriate inferential statistical technique was used to test the research hypothesis at the 0.05 level of significance. The study is expected to establish that target costing knowledge has a significant impact on students’ ability to evaluate product pricing decisions. Students with adequate knowledge of target costing may be better able to determine the relationship between the expected market price, desired profit and allowable product cost. Knowledge of target costing can help students assess whether the estimated cost of a product is compatible with the price customers may be willing to pay and the profit the business intends to achieve. Students may also be better prepared to identify situations where product costs need to be reduced to maintain the desired profit at an acceptable selling price. These competencies can provide students with a stronger basis for evaluating pricing alternatives and making financially informed judgments. Furthermore, practical exposure to target costing can strengthen students’ analytical reasoning and problem-solving abilities. Classroom exercises involving product costs, market prices, target profits and realistic pricing cases can provide students with opportunities to apply theoretical knowledge to practical situations. Students can be required to determine target costs, compare estimated costs with allowable costs and recommend appropriate pricing or cost reduction measures. Such activities can help students move beyond memorizing target costing formulas and develop the ability to interpret cost and pricing information in relation to business objectives. Regular practice can also improve students’ confidence in evaluating product pricing decisions and explaining the financial consequences of different alternatives. The findings will be useful to Accounting Education students, lecturers, curriculum planners and accounting departments in Nigerian polytechnics. Students can benefit from developing practical target costing knowledge that enables them to understand the relationship between market price, product cost and desired profit. Lecturers should provide regular exercises involving target price, target profit, target cost and cost reduction decisions. Accounting departments should also integrate practical target costing activities into relevant cost and management accounting courses. Business case studies involving new products, changing market prices and cost reduction situations can expose students to realistic pricing decisions and help them understand how target costing supports effective product evaluation. The study recommends that lecturers should combine theoretical instruction on target costing with practical exercises, case studies and product pricing activities. Students should be encouraged to develop a clear understanding of target price, target profit, target cost and cost reduction and apply these concepts when evaluating pricing alternatives. Accounting departments should provide adequate learning resources and practical opportunities for students to analyze product cost and pricing information. In conclusion, strengthening target costing knowledge can improve students’ ability to evaluate product pricing decisions and contribute to stronger cost analysis, pricing evaluation, analytical reasoning, profit assessment, problem-solving ability, decision-making competence, management accounting knowledge and professional preparedness among Accounting Education students in Nigerian polytechnics.

Keywords: Target Costing Knowledge, Product Pricing Decisions, Target Costing, Accounting Education, Accounting Students, Target Price, Target Profit, Target Cost, Cost Reduction, Product Cost, Pricing Analysis, Cost Management, Profitability, Management Accounting, Financial Analysis, Analytical Skills, Decision-Making Skills, Accounting Competence, Nigerian Polytechnics.