What is target costing?
An example of an AI chatbot conversation about target costing in product pricing.
What is target costing?
Target costing is a pricing strategy where a company determines the desired profit margin and then works backward to establish a cost structure that allows for that profit.
How does target costing differ from traditional costing?
Unlike traditional costing, which focuses on costs incurred, target costing emphasizes setting a target price based on market conditions and then managing costs to meet that price.
Can you give me an example of target costing in action?
Sure! For instance, if a company wants to sell a product for $100 and aims for a $20 profit, it would set a target cost of $80 and then design the product to meet that cost.
What are the benefits of using target costing?
The benefits include better alignment with market prices, improved cost management, and enhanced competitiveness.
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