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The key objective of target costing is to enable management to use proactive cost planning, cost management, and cost reduction practices where costs are planned and calculated early in the design and development cycle, rather than during the later stages of product development and production.
Target costing is the method which company sets the production cost by deducting profit margin from the target selling price. Company uses this strategy by setting the selling price, determine desirable profit, and calculate the target cost. Target Cost is the remaining balance after deducting profit from selling price.
Ken Garrett explaines target costing and lifecycle costing, and gives examples as to how and when you would use these costing techniques
Target costing is an approach to determine a product's life-cycle cost which should be sufficient to develop specified functionality and quality, while ensuring its desired profit. It involves setting a target cost by subtracting a desired profit margin from a competitive market price. [1]
Jun 1, 2024 · Target costing is a pricing strategy used by companies to manage costs and achieve desired profit margins. Target costing involves determining the allowable cost of a product based on its market-driven selling price and desired profit margin.
Jun 15, 2022 · Target Costing is a management technique that assists a business in deciding the prices based on external factors. These factors include competition, the presence of switching costs for the customer, similar products, and more. The presence of such factors leaves management with little or no control over the selling price.
Dec 10, 2023 · What is Target Costing? Target costing is a system under which a company plans in advance for the price points, product costs, and margins that it wants to achieve for a new product. If it cannot manufacture a product at these planned levels, then it cancels the design project entirely.
