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Target costing is an approach to determine a product's life-cycle cost which should be sufficient to develop specified functionality and quality, while ensuring its desired profit. It involves setting a target cost by subtracting a desired profit margin from a competitive market price. [1] A target cost is the maximum amount of cost that can be ...
Cost-plus-incentive fee. A cost-plus-incentive fee ( CPIF) contract is a cost-reimbursement contract which provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. [1]
Product cost management. Product cost management (PCM) is a set of tools, processes, methods, and culture used by firms who develop and manufacture products to ensure that a product meets its profit (or cost) target.
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return. [ 1][ 2] An alternative pricing method is value-based pricing.
Absorption pricing. This pricing method aims to recover all the costs of producing a product. The price of a product includes the variable cost of each item plus a proportionate amount of the fixed costs: Unit Variable Costs + (Overhead + Managing Costs) รท Number of units produced = Absorption Price. Fixed or variable costs, direct or indirect ...
The point of total assumption ( PTA) is a point on the cost line of the profit-cost curve determined by the contract elements associated with a fixed price plus incentive-Firm Target (FPI) contract above which the seller effectively bears all the costs of a cost overrun. The seller bears all of the cost risk at PTA and beyond, due to a dollar ...
In DTC, cost considerations also become part of extended requirements specifications. [1] In contrast to the closely related target costing, DTC does not mean a product will exactly reach a defined cost, rather, it is about "considering cost as a design parameter in your product development activities". [2]
A target market, also known as serviceable obtainable market ( SOM ), is a group of customers within a business 's serviceable available market at which a business aims its marketing efforts and resources. A target market is a subset of the total market for a product or service. The target market typically consists of consumers who exhibit ...