Target costing is a variation of cost-based pricing models that reverses the normal procedure for a cost-based pricing model.

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Target costing starts with a target price that is set based on analysis of the market and then calculates the maximum allowable cost to achieve that target price, whereas a traditional cost-based pricing model starts with the cost of producing a product and adds a markup to determine the selling price.

Target Costing Is a Variation of Cost-Based Pricing Models That