ACCA PM Chapter 2 - Target Costing

Target Cost is the maximum cost per unit in order to achieve the required profit.

It is used to compare the estimated actual cost. The excess of the actual cost over the target is called "Target Cost Gap".

Possible ways of attempting to close the target cost gap:

1. Examine costs to look for cheaper.
2. Reexamine design of the product, can we reduce cost without needing to reduce the price.

The five major characteristics that distinguish services from manufacturing are:

1. Intangibility
2. Inseparability / Simultaneity
3. Variability / heterogeneity
4. Perishability
5. No transfer of ownership

Source:https://opentuition.com/acca/pm/acca-performance-management-pm-lectures/