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