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“Help! Save me from ‘Target Costing’—everything around me is breaking!”

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Target Costing is defined as a cost-management tool for reducing the overall cost of a product over its entire life cycle with the help of production, engineering, research, and design. A target cost is the maximum outlay that can be incurred on a product while still meeting the required profit margin at a particular selling price.

It’s all about reducing COST. This all too often involves the use of cheaper components and materials, including those that are
less robust, less reliable, and more likely to fail during normal use. This can translate into shoddy products with a short working lifespan. You may ask, “Why is this so important?” Well, when in terms of cost savings, you’d surely want to avoid the kind of mistake the following company made.

Download the full articlepublished in PDMA Visions Magazine July 2010

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