How does target costing work?

Can you explain how target costing works in product development?

Sure! Target costing is a pricing strategy where a company determines the desired profit margin and then works backward to establish a target cost for a product.

What are the steps involved in implementing target costing?

The steps include setting a target price, determining the desired profit, calculating the target cost, and then analyzing costs to meet that target.

How does target costing benefit a company?

It helps companies control costs, improve profitability, and ensure that products are competitively priced in the market.

Are there any challenges associated with target costing?

Yes, challenges include accurately estimating costs, aligning teams, and maintaining quality while reducing costs.