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For example, let’s say I am a product manager for a new smartphone. I know that the market price for smartphones is around $1,000. I also know that my company wants to make a profit of $200 per smartphone. Using cost-plus pricing, I would set the selling price of my smartphone at $1,200. However, if I use target costing, I would first determine the features and functions that customers are willing to pay for. Let’s say I find that customers are willing to pay $1,000 for a smartphone with these features and functions. I would then work backward to determine the cost that can be incurred to produce the smartphone. If the cost is too high, I would need to make changes to the product or find ways to reduce costs.

Target costing is a more strategic pricing method that can help companies to achieve their marketing and financial goals. It is also a more customer-focused pricing method that can help companies to win market share.

In my future career, I plan to work in product management. I believe that target costing is an important tool that product managers can use to set accurate and competitive prices for their products.

Here are some of the advantages of target costing over cost-plus pricing:

• Target costing takes into account the competitive landscape and the perceived value of the product to the customer.
• Target costing can help companies to achieve their marketing and financial goals.
• Target costing is a more customer-focused pricing method.

Here are some of the disadvantages of target costing:

• Target costing can be more complex and time-consuming than cost-plus pricing.
• Target costing can be difficult to implement if the company does not have a good understanding of its costs.

Overall, I believe that target costing is a more accurate and effective pricing method than cost-plus pricing. However, it is important to weigh the advantages and disadvantages of each method before deciding which one is right for a particular product or company.