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Target costing is another way to "watch" costs. Discuss.

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Traditional wisdom was to create a product, figure out the cost, add a profit margin, and then determine the price. Target costing is another way to "watch" costs and setting prices. See references below.

Accounting for Management. (n.d.). Target Costing Approach to Pricing. Retrieved from http://www.accountingformanagement.com/target_costing_pricing_products_and_services.htm

J Feil, P. , Yook, K., & Kim, I. Japanese Target Costing: A Historical Perspective. (2004, Spring). International Journal of Strategic Cost Management. Retrieved from http://economiceducation.us/dotAsset/785833.pdf

Part 5 Target Costing. BMALeanManagement. (2011, July 4). YouTube Video. Retrieved from http://www.youtube.com/watch?v=hiiw1t4DA0Q

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Solution Summary

Your tutorial is 262 words plus four references and explains how target costing works and gives an example for a service industry as well as a manufacturing example.

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Traditional wisdom was to create a product, figure out the cost, add a profit margin, and then determine the price. Target costing is another way to "watch" costs and setting prices.

Target costing means that you start considering cost before the product is even designed. You first decide what the customer wants (product, features, life cycle, durability) and what they are willing to pay for it. Then, you attempt to create a product with the features that the customers wants within the cost needed to yield a profit margin (you already know the market price so you back into the cost by assuming a profit margin).

This ...

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