Target Cost Formula

Target Cost Formula

Target Cost can be calculated by the following Formula. Target cost concept is widely used in development of new product. This is an effective tool to control the cost of the new product.

Target Cost = Target Price-Target Profit

Example

Target Sales Price of Product= 120

Target Profit of Product= 70

Calculate Target Cost

Solution

Target Cost = Target Price-Target Profit

=120-70

=50 (Target Cost)