Apply target costing to connect market price, required margin, and design trade-offs.
Design economics The thermostat target price is $119. Required gross margin is 32%. The first estimated cost is $93, which is above the allowable cost. Target costing works only if cost is managed while the product is still shapeable. Target costing Price -> Profit -> Allowable cost -> Design Start with what the market will pay and what the business must earn, then design to the allowable cost. Cost-plus Build it, add margin, hope the price works Cost becomes a design requirement, not a launch surprise. Manage cost when choices are still cheap to change. 01 Price 02 Profit 03…
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