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Basic steps involved in target costing process


Basic steps involved in target costing process
  1. Set target selling price based on customer expectations and sales forecast
  2. Establish profit margin based on long-term profit objectives and projected volumes
  3. Determine target (or allowable) cost per unit (target selling price less required profit
  4. Compare with Estimate the current cost of new product
  5. Establish cost reduction targets for each component and production activity, using value engineering and value analysis
Target Costing process
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