A manufacturer of toothpaste has estimated the price at which the product will sell, making use of market surveys and consumer analysis. A profit margin has been set. Finally a target cost has been established by subtracting the target cost from the estimated selling price. The plant manager and the research and development unit have been asked to design the product in such a way that it can be produced within the target cost.

A rival manufacturer of toothpaste takes a different approach. Here the selling price is again estimated from market surveys and consumer analysis and a profit margin is set. However, the product design is then accepted on the recommendation of the research and development unit and the plant manager then focuses on a programme of continuous improvement which will keep costs within acceptable limits.

Is there a role for management accounting in either of these situations?