Definition Target Costing

Definition Target Costing

Definition of TARGET COSTING: A method of product costing where the final cost has been determined after analyzing the market and designing the product to meet demands. See target cost.

Target costing is product development that adopts a cost target as a primary goal or constraint. The following are illustrative examples. A highly competitive industry such as solar energy where ability to cut costs to make products cheaper is key to survival as a firm.

Search target costing and thousands of other words in English Cobuild dictionary from Reverso. You can complete the definition of target costing given by the English Cobuild dictionary with other English dictionaries : Wikipedia, Lexilogos, Oxford, Cambridge, Chambers Harrap, Wordreference, Collins Lexibase dictionaries, Merriam Webster

RETHINKING PROJECT DEFINITION IN TERMS OF TARGET COSTING. A number of lean construction theorists, including this author, have made contributions to rethinking project definition as a phase within lean project delivery. Target costing is a methodology developed by manufacturers of consumer products to systematically improve product profitability,

Definition, Explanation and Formula of Target Costing: Target costing is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure. A number of companies–primarily in Japan–use target costing, including Compaq, Culp, Cummins Engine,

2. Costing: Final cost of a product or service that must be achieved in order to generate the desired level of sales revenue and income.See also target costing.


Target cost method is a method of market-driven costing, as target costs are established first by determining the competitive price of the market, minus the profit rate to be achieved and a customer-oriented approach, which means that the cost analysis is driven by customer requirements on product quality and price.

Published in: The Romanian Journal of Economics · 2013Authors: Emilia Vasile · Ion CroitoruAbout: Target costing

Definition of Kaizen Costing: Kaizen is the Japanese term for making continuous improvements in relatively small activities rather than major innovative improvement. The major difference between target and Kaizen costing is that target costing is applied during the design stage where as Kaizen costing is applied during the manufacturing stage of a product’s life.

Target costing is a reverse process where companies compare the potential intended benefits of a product or solution with the optimal market price.

Develop Profitable New Products with Target Costing Magazine: Summer 1999 Research Feature July 15, 1999 Reading Time: 30 min Robin Cooper and Regine Slagmulder

What is ‚Activity-Based Costing (ABC)‘. Activity-based costing (ABC) is an accounting method that identifies and assigns costs to overhead activities and then assigns those costs to products. An activity-based costing (ABC) system recognizes the relationship between costs, overhead activities, and manufactured products,

Target costing and lifecycle costing can be regarded as relatively modern advances in management accounting, so it is worth first looking at the approach taken by conventional costing. Typically, conventional costing attempts to work out the cost of producing an item incorporating the costs of resources that are currently used or consumed.


The background to target costing According to the CIMA Official Terminology 2 a target cost is ‘a product cost estimate derived by subtracting a desired profit margin from a competitive market price.’ Ta rget costing is a technique which developed in the early 1970s in Japan’s manufacturing industry as consumer demand for more

This ensures that the target costs for the withdrawal of a semifinished product are the same as the actual costs. You can use the calculation base in the costing type for the standard cost estimate to choose a cost component view that is used for the calculation of the material overhead view.

Target costing— pricing that starts with an ideal selling price based on customer considerations and then target costs that will ensure that the price met.Target costing reserves the usual process of first designing a new product, determining its cost, and then asking, “can sell it for that?”


on the grounds that “target costing” was too vague and did not convey the true meaning of “genka kikaku.” Japanese Target Costing: A Historical Perspective Patrick Feil, Keun-Hyo Yook, Il-Woon Kim Patrick Feil is a member of the executive board of in Germany in charge of fi-nance/controlling and market-ing/communications.

Barrons Dictionary | Definition for: target pricing. a pricing method that involves (1) identifying the price at which a product will be competitive in the marketplace, (2) defining the desired profit to be made on the product, and (3) computing the target cost for the product by subtracting the desired profit from the competitive market price.

What is TARGET COST? 1. Contracting. Final cost that is agreed on. 2. Costing. Final cost of a service or product that needs to be achieved to generate desired sales revenue and income. See target costing.

Cost accounting is the process of recording, classifying, analyzing, summarizing, and allocating costs associated with a process, and then developing various courses of action to control the costs. Its goal is to advise the management on how to optimize business practices and processes based on …

Origins ·

Continue educating yourself about this subject with the lesson titled Target Costing: Definition, Formula & Example. You can use this lesson to strengthen your understanding of: Why some prices

Target costing is a method used in product design that involves estimating a target cost for a new product, then designing the product to meet the cost. Customer Requirements: The first element of target costing understands customer requirements, including the perfor­mance and cost characteristics of competitors’ products.


Target costing starts with setting a target cost, which is a very complex and difficult process in construction as compared to manufacturing. In this paper, project

Target costing is a two-step process to determine the cost of your product when cost accounting. First, you estimate a target price — an estimated price you think your customer is willing to pay based on market conditions.

Time – Target costing reduces the time from concept to marketing of products because products and processes are designed simultaneously Target Costing is the allowable amount of cost that can be incurred on a product and still earn the required profit from that product.

Nov 22, 2014 · Target costing is a process in which firms identify the quality and functionality needed to satisfy customers and what price they are willing to pay before designing the product. Products are only manufactured if the firm can control costs to meet the required price.

Definition: Variable costing, also called direct costing, is an accounting method used to allocate production costs to product being produced. This method allocates all variable-manufacturing costs to the product during the period.

The target market is a central focus within a marketing plan that determines other essential factors for the product, such as distribution, price and promotion efforts.

Target costing represents a fundamentally different approach. It is based on three premises: 1.) orienting products to customer affordability or market-driven pricing, 2.) treating product cost as an independent variable during the definition of a product’s requirements, and 3.) proactively working to achieve target cost during product and

Target costing is defined as a cost management tool for reducing the overall cost of a product over its product life cycle. Management utilizes this pricing technique to meet both the demands of its customers as well as company profit goals.

Target Costing as a Strategic Tool Magazine: Fall 1999 Research Feature October 15, there is little consensus on the technique’s exact definition or when its use is most beneficial. The logic of target costing is simple. The target cost is a financial goal for the full cost of a product, derived from estimates of selling price and

Target Costing . Target costing is a way of deriving a target cost to set production managers and is best viewed as the opposite of cost-plus pricing. Problems with cost-plus pricing . In a traditional cost-plus pricing system, The cost of the item is established first.

Target costing is defined as „a disciplined process for determining and achieving a full-stream cost at which a proposed product with specified functionality, performance, and quality must be produced in order to generate the desired profitability at the product’s anticipated selling price over a

Target Costing Most of the costing methodologies described in this post are primarily concerned with the interpretation of costing data after it has already been incurred. Target costing differs from them in that it describes the costs that are expected to be incurred, and …

‘Target costing is a process of determining a maximum allowable cost for a product by subtracting a desired profit from the product’s market price.’ ‘We take firms through a process called activity-based costing.’ ‘Even product and process costing fall outside the domain of cost accounting.’

Target Costing & Traditional Costing by Jeremy Cato ; Updated September 26, 2017 Traditional (or cost-plus) costing and target costing are the most commonly used methods for …

Target costing is a pricing method used by firms. It is defined as „a cost management tool for reducing the overall cost of a product over its entire life-cycle with …

INTRODUCTION OF TARGET COSTING Target costing is a system of profit planning and cost management. The required features and performance of the proposed product are established. Then target costing determines the life cycle cost at which the product must be produced, to generate the firm’s desired level of profit.

Target Costing Pros and Cons. Target costing recognizes that a business doesn’t have total control over pricing; price is limited by what the market will pay.

Target costing is the concept of market-oriented target cost management, which applies in the early phases of product development. With target costing products are to be developed to fulfil functional features defined by the customer, thus involving costs to be agreed / accepted by the customer.

Target costing 1. Target Costing By: Sainatth Wagh 2. Definition Target Costing (TC) is defined as a cost management tool for reducing the overall cost of product over its entire life cycle with the help of the production, engineering, R&D…..Intent of target costing Reduction in cost Planning & designing high quality products Meeting customers needs Using value engineering to target cost

Definition of Cost Target: This value represents the maximum allowable expenditure for material, labor, outsourcing, overhead and all other expenses associated with that project. See also operation cost target.

Target costing is a system of profit planning and cost management. The required features and performance of the proposed product are established. Then target costing determines the life cycle cost at which the product must be produced, to generate the firm’s desired level of profit.

Target costing is a pricing method used by firms. It is defined as „a cost management tool for reducing the overall cost of a product over its entire life-cycle with the help of production

The use of target costing can be a promising approach to achieving a more proactive cost management. Developed over the past 40 years by a number of Japanese companies, Target Costing differs from the cost-plus approach traditionally used in the construction industry.


target costing by manufacturing industry in South Western Nigeria is low. However, the findings also showed that there is a strong positive relationship between adoption of Target costing and of improvement in Return on Investment and reduction of cost. Keywords: target costing, competition, performance and profitability.

Target cost for construction. Target costs are generally associated with cost-reimbursable contracts. They introduce a mechanism enabling the contractor, and sometimes the consultant team, to share in the benefits of cost savings, but also to bear some of the client’s cost when there are cost overruns.

Before discussing how cost accountants setup target costing; what is the so-called target costing? You may ask. Let me tell you in short words: target costing is a costing methodology that uses preset cost—that is charged into products—before it’s actually happened. The preset cost, in this particular method is called target cost.

By definition target costing is a method of cost planning that focuses on reducing costs for products that require discrete manufacturing processes and reasonably short product life cycles.

Author: Fairuz Nizam