What is Target Pricing?

Mr.Labib you explained it really well. Thanks

Thanks Krishna !

Target price= Cost price + profit margin 

Calculated by each occasion of a new product design .

Pricing method whereby the selling price of a product is calculated to produce a particular rate of return on investment for a specific volume of production.

Target costing involves setting a target cost by subtracting a desired profit margin from a competitive market price.

A lengthy but complete definition is "Target Costing is a disciplined process for determining and achieving a full-stream cost at which a proposed product with specified functionality, performance, and quality must be produced in order to generate the desired profitability at the product’s anticipated selling price over a specified period of time in the future."

This definition encompasses the principal concepts: products should be based on an accurate assessment of the wants and needs of customers in different market segments, and cost targets should be what result after a sustainable profit margin is subtracted from what customers are willing to pay at the time of product introduction and afterwards. These concepts are supported by the four basic steps of Target Costing:

• Define the Product
• Set the Price and Cost Targets
• Achieve the Targets
• Maintain Competitive Costs.

Japanese companies have developed target costing as a response to the problem of controlling and reducing costs over the product life cycle.