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Target costing is not just a method of costing, but rather a management technique wherein prices are determined by market conditions, taking into account several factors, such as homogeneous products, level of competition, no/low switching costs for the end customer, etc.
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 costing and life-cycle costing can be regarded as relatively modern advances in management accounting, so it is worth first looking at the approach taken by conventional costing. Typically, conventional costing attempts to work out the cost of producing an item incorporating the costs of resources that are currently used or consumed.
Target Cost refers to the total cost of the product after deducting a certain percentage of profit from the selling price. It is mathematically expressed as the expected selling price – desired profit required to survive in the business.
6 paź 2024 · 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.
1 cze 2024 · Target costing involves determining the allowable cost of a product based on its market-driven selling price and desired profit margin. This costing technique involves cross-functional collaboration and continuous improvement to achieve cost targets without compromising quality.
1 sty 2024 · A target price is the estimated price for a product or service that potential customers will be willing to pay. A target cost is the estimated long-run cost of a product or service that allows the firm to achieve a targeted profit. Target cost is derived by subtracting the target profit from the target price. Target costing is widely used.
