Target costing is better suited to assembly orientated industries than service industries that have a large fixed cost base.  

Costs may be reduced in target costing by removing product features that do not add value. 

 A target cost gap is the difference between the target cost for a product and its projected cost. 

 Products should be discontinued if there is a target cost gap. 

Set-up costs 

Raw material handling costs 

Raw material storage costs 

Customer order costs 

Implementation of ABC is unlikely to be cost effective when variable production costs are a low proportion of total production costs.  

 In a system of ABC, for costs that vary with production levels, the most suitable cost driver is likely to be direct labour hours or machine hours. 

 Activity based costs are the same as relevant costs for the purpose of short-run decision making. 

 Activity based costing is a form of absorption costing. 

ABC recognises the complexity of modern manufacturing by the use of multiple cost drivers 

ABC establishes separate cost pools for support activities 

ABC reapportions support activity costs 

BC is an appropriate costing system when overheads vary with time spent on production

Labour costs are a relatively minor proportion of total costs 

Overheads vary with many different measures of activity 

Overheads are difficult to predict 

Cost drivers are difficult to identify