Target costing
In this lesson, you'll learn how target costing reverses traditional pricing logic to help you control costs from day one—a critical technique used by tech and consumer product firms operating in highly competitive markets.
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In this lesson
- 0:00 Introduction to Target Costing
- 0:47 Cost Plus Pricing versus Target Costing
- 2:36 Determining Price and Profit Margin
- 3:45 Understanding the Cost Gap
- 5:00 Closing the Cost Gap: Value Engineering
- 6:22 Key Benefits of Target Costing
About this lesson
You'll discover how to determine a market-competitive price first, work backwards to calculate your target cost, and identify cost gaps that need closing before production begins. This approach is essential for Performance Management and appears across CIMA and ACCA qualifications, particularly when studying cost management strategies. By mastering target costing, you'll understand how leading businesses like Toyota balance profitability with market competitiveness, and how to use value analysis and value engineering to strip unnecessary costs without compromising customer value.
Duration: 7m
Transcript
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