How can target costing improve your decision making?

“Your most unhappy customers are your greatest source of learning.” – Bill Gates Remember that the cost of production should not exceed the customers’ expectation. Target costing identifies cost objectives that are subordinate to the perception of the customer. It helps with the right pricing, so you don't overcharge or undercharge. Accomplishing this getting customer's satisfaction, retention, win the competitors and so on.

Cost allocation is the process of assigning or distributing costs to various cost objects such as products, services, departments, or projects. This allocation helps organizations understand the true cost of producing goods or delivering services, facilitating better decision-making and performance evaluation. Cost allocation is particularly important in situations where costs are shared among multiple cost objects and need to be fairly and accurately distributed.

While we are work in a highly competitive marketplace so there are many traders in market and they are seeking to gain more clients and distribute products in a wide range and this no longer achieved by putting prices away from other competitors so the main factor will take in consideration the competitive market price then adjust the cost of production and overhead according to this price also the target costing will help in cost reduction process by tracking the actual and compared to the target or estimated cost so target costing need to cost planning in the design phase of production as well as cost control throughout the resulting?product life cycle.

a) Target costing is an efficient tools in the hands of management for achieving the objectives, optimising the resources and increasing production & productivity. b) Actual costs to be compared with the targets and variance analysis can be done for taking corrective action with due regard to customer satisfaction and maintaining the brand quality of the product. c) Evaluation of alternative opportunities can be sorted out and decisions can be taken accordingly. d) Cross functional collaboration and clear understanding of each department will create a conducive working environment. e) It will help to maintain quality, reduce cost with the changing scenario. d)