Target costing

Abstract

Focusses on the use of target costing for new product development. This approach concentrates on determining costs for a product during the planning and design stage. Also describes the use of cross‐functional teams made up of industrial marketers, cost accountants and others critical to the design and manufacturing decisions required for determining the price and features with which a product is most likely to appeal to potential buyers. After deducting the desired profit margin from the projected selling price, planners develop estimates of each product element that make up a product′s costs for design, manufacturing, sales and marketing. Further analysis is carried out to identify and estimate the cost of each component that makes up the finished product. Stresses the critical role that management accountants and other members of an organization can play in the design and manufacture of a new product at a specified price.

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