Target costing is a pricing strategy that involves determining market prices and subtracting desired profit margins to derive production costs.
Target costing is the strategy of first determining what the market is willing to pay and then subtracting a desired profit margin to determine a desired cost of production.
This method enables a business to strategically set prices based on market expectations while ensuring a specified profit margin.
By applying target costing, companies can align their pricing strategies with market demands for optimal profitability.
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