Target Costing
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Target Costing
Target costing is a cost management technique that is used by companies to plan and control the cost of products and services. It is a proactive approach that focuses on designing products that meet customer requirements at a target cost determined in advance by the company. This approach involves understanding customer needs and expectations, and then designing a product that meets those needs while providing a price point that customers will be willing to pay. Target costing is used in the design process to get the best performance out of a product, at the lowest possible cost. The target costing process involves several steps. First, the company determines the target cost for the product based on market research and analysis of customer needs and expectations. Second, the company identifies the cost drivers for the product, which are the factors that contribute most significantly to the product's cost. Third, the company works to reduce costs by identifying areas where costs can be reduced without sacrificing product quality, features, or performance. Fourth, the company continuously monitors the product's cost throughout the design and production stages to ensure that it remains within the target cost. One of the key benefits of target costing is that it helps companies to remain competitive in the marketplace. By designing products that meet customer needs at a target cost, companies are able to offer products that are priced competitively and that meet customer expectations. In addition, target costing helps companies to identify areas where costs can be reduced, which can lead to increased profitability.
Cost management, customer requirements, market research, cost drivers, product quality
Target Costing
Target Costing is a cost-management technique that involves setting a financial target cost, which is then compared to the actual cost of a product in order to identify where costs can be reduced during the design process, thereby helping to ensure that the product will remain competitively priced. This approach is used in the design process to get the best performance out of a product, at the lowest possible cost. It involves understanding the customer needs and expectations, and then designing a product that meets these needs, and at the same time, provides a price point that customers will be willing to pay. Target Costing involves the effective management of all aspects of the costs involved in the design of the product, from the material costs, to the labour costs, to the overhead costs. It is an approach that takes into account all the components of the product and their associated costs, in order to ensure that the product's overall cost is kept in line with the target cost. This approach is essential for ensuring that the product remains competitively priced, and that it is meeting the customer expectations.
Target Costing, Design, Cost Reduction, Product Design, Cost Management, Price Point.
CITATION : "Ji-Soo Park. 'Target Costing.' Design+Encyclopedia. https://design-encyclopedia.com/define/target-costing?E=198009 (Accessed on October 14, 2026)"
Target Costing
Target Costing is a cost management tool used to plan and control the cost of products and services. It is a type of value engineering which aims to reduce the cost of a product to a target cost determined in advance by the company. It is used to help companies make cost-effective decisions in the design, engineering, and production stages of product development to ensure that the product or service is designed and manufactured to meet customer requirements at the target cost. By utilizing target costing, companies can set a target cost for a product and then systematically identify areas to reduce costs without sacrificing product quality, features, or performance.
Cost Reduction, Cost Control, Product Development.
Target Costing on Design+Encyclopedia
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