"Target costing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably?"explain ?(please answer in 200 to 250 words)
Target costing is a critical element that not only entails pricing but also a management method where market conditions determine prices. It integrates factors like competition level, homogenous products, and switching prices for the final consumer. When these elements come into play, the management would wish to regulate the costs since they have limited or no say over the retailing price. Therefore, a target cost reflects a product price approximation obtained from the competitive market rate.
Target costing as a management procedure responsible for finding, anticipating, and filling customer needs profitably becomes very significant. Drawing examples from industries such as energy, healthcare, construction, or fast-moving consumer goods (FMCG), competition is highly intense since product prices are established by market forces, leaving producers with little control over selling prices. In such sectors, the management can simply control, to a certain extent, their cost, leaving them to concentrate on influencing every part of service, product, or costs of operations. Consequently, the main aim of target costing is to facilitate management to adopt proactive cost management, cost planning, and cost economization practices. In such a situation, costs are integrated and calculated early during the product design and development stage instead of factoring in at later phases of product production.