6 th International Thematic Monograph: Modern Management Tools and Economy of Tourism Sector in Present Era https://doi.org/10.31410/tmt.2021-2022.93 Application of the Concept of Target Costing in Hospitality Bojana Novićević Čečević 1 Received: November 13, 2021 Ljilja Antić 2 Revised: February 28, 2022 Jovana Milenović 3 Accepted: March 4, 2022 Keywords: Target cost; Cost price; Service sector; Hospitality Abstract: In recent decades, the service sector has become a fast-grow- ing world economic activity, and hospitality organizations are a key ele- ment of the service sector. Providing high-quality services in this sector at lower prices than the competition is an important factor and the basic goal of companies’ business success. In order for hospitality organizations to achieve this goal, it is necessary to fnd an adequate way to calculate costs and determine the cost price of services provided. The application of mod- ern costing methods enables hospitality organizations to increase profts, increase labor productivity, shorten service delivery time and reduce costs. One of the concepts of cost management in a given business environment is target costing. The concept is focused on reducing costs, primarily in the product design phase to the target amount. The paper analyzes the possibil- ity of applying the modern concept - target costing in a hospitality company. Creative Commons Non Commercial CC BY-NC: This chapter is distributed under the terms of the Creative Commons Attribution-Non- Commercial 4.0 License (https://creative- commons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduc- tion and distribution of the work without further permission. 1. INTRODUCTION T he competitive advantage of a company can be seen as the superiority of a particular market participant, resulting from the proper use of resources and the use of key competencies that are refected in the creation of required or higher value for customers than other market partici- pants. The required value is usually shown through lower prices or unique product/service char - acteristics that will best bring customer satisfaction. It should be borne in mind that the notion of competitive advantage has changed over time and has encompassed diferent product and ser - vice characteristics. Initially, the emphasis was on low costs, quality and fast delivery, but later it included reliability, fexibility, speed of response to requests, the time required to place a new product/service, quality of after-sales services and the like. Such an upgrade of the concept of competitive advantage is a result of changes in customer needs over time as well as the sector that provides the product/service. In order to achieve and maintain a competitive advantage, company managers in both the manu- facturing and service sectors formulate a company strategy that will be a kind of guide to achiev- ing all aspects of competitiveness in production and service delivery. For these needs, they need appropriate information support coming from concepts, tools and techniques of modern man- agement accounting. The reason for looking for new information support is that the traditional approach has shown its shortcomings in a modern business environment with pronounced local and international competition, rapid technological progress, different customer requirements, short product life cycle. One of the concepts of modern management accounting that aims to rational- ize costs and provide greater value for customers by integrating activities performed primarily in the product design phase, but also in other phases of the product life cycle is target costing (TC). 1 Faculty of Economics, University of Niš, Trg Kralja Aleksandra Ujedinitelja 11, Niš, Serbia 2 Faculty of Economics, University of Niš, Trg Kralja Aleksandra Ujedinitelja 11, Niš, Serbia 3 Faculty of Economics, University of Niš, Trg Kralja Aleksandra Ujedinitelja 11, Niš, Serbia