Target costing meaning

Target costing is a disciplined process for determining and realising a total cost at which a proposed product with specified functionality must be produced to generate the desired profitability at its anticipated selling price in the future. CIMA defines target cost as “a product cost estimate derived from a competitive market price.”

Target Costing is a disciplined process that uses data and information in a logical series of steps to determine and achieve a target cost for the product. Also, the price and cost are for specified product functionally, which determined from understanding the needs of the customer (benefits) with a viable market price that achieves the company’s profitability goals.

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