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What are target costs?

  • Management Dictionary
  • Management Control

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How can costs be reduced without diminishing the product’s value for the customer? This question is at the origin of the target costing approach.

It is not a cost calculation technique, but rather a cost management method. Its objective is to deliver a product whose perceived value meets customer expectations while not exceeding a maximum cost, the target cost, which ensures that shareholder margin requirements are met.

This method is based on two principles: the additivity principle and the symmetry principle.

The approach aims to control costs while preserving customer value. However, it can be very complex to implement.

Mots clés
  • Financial analysis, Strategic cost management, Target costing, Target costs, Value analysis

Auteur.e(s)

TAHAR Caroline
Associate Professor
iaelyon School of Management

Institution(s)

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