Post by Dr Walter Dolan
Thinking about creating a new product for the market place? You will benefit from conducting Target Costing. Or, is ascertaining accurate costings an insurmountable hurdle?
Target costing has become vital when making decisions about introducing a new product.
Traditionally, the selling price for a new product was arrived at by estimating the total cost of the individual product and adding a mark-up to give an acceptable profit for the product. However, consumer resistance to the selling price often means less product sells than hoped for. So where to from here?
Best we conduct Target Costing!
A target costing approach first establishes a selling price that the market is prepared to pay, deducts a reasonable profit margin and thus arrives at the maximum allowed cost for the product. This maximum allowed cost is virtually 'set in concrete', and the combine[...] Read more »