TARGET COSTING

 

A Target Cost is the cost a firm could charge in order to still earn a profit margin if that product were sold at a particular selling price.

 

Costs are determined after first giving consideration to factors regarding demand and supply in the markets. Then work and costs are adjusted given the help of other departments (production, engineering, research and design) to try to meet a pre-determined target.

 

Target costing helps to ensure that the firm stays competitive.