Do you want to reduce your costs by 25% to 30%? If so, then target costing is the right choice for you. Therefore pricing using target costing can help you cut costs without sacrificing quality.
Traditional and target costing – differences
The two methods share things in common but also have differences. You choose the method most appropriate for your target customers and product mix.
Traditional costing (or cost-plus costing) is the most used method for pricing goods and services. It’s based on adding an average overhead rate to the costs of manufacturing products.
The focus of target costing is reducing waste from the start of production. Don’t wait until products are made. Moreover, this means that every step of the process is designed with cost-cutting in mind. You gain better prices and margins for your business.
Target costing was developed by Toyota Motor Corporation to reduce costs while increasing the quality of its products. It’s now widely used throughout many industries from automotive to consumer electronics.
Target costing has been around for many decades, much longer than cost-plus costing.
Listen now to find out more about how target costing works!
If you’re interested in dealing with pricing and controlling costs this is explained here for you. You learn how it affects you, so as to avoid confusion and overwhelm. Many businesses, from start-ups to established ones, find themselves in the same situation – wanting to know about how to price using target costing, more particularly taking steps to avoid it. This podcast will help.
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