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Definition of target costs

Former Member
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Hello

Can somebody give me a clear definition of target costs?

I suggest it planned costs per unit (of material , activity , etc )* actual quantity produced

thanks

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
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Dear Comandante,

Please refer this thread

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Regards

Madhu

Former Member
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Thanks

Does it mean that target costs make sence only in if output material is valuated at standatd price and there is a cost estimate for the output material?

ajaycwa1981
Active Contributor
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HI

Yes.. you are right

Regards

Ajay M

Former Member
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Thanks

especially taking into account hot weather

Former Member
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Could you please tell me how target costs are populated if output material is valuated at avrage moving price. I know they arent empty

Former Member
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lets imagine that the output material is valuated at standatd price and thera two components of this proction order

price quantity

C1 10 2

C2 5 4

planned quantity for this two compnents is a bit different from standard quantity in a cost estimate. Price is a bit different as well as some time has gone since cost estimate was done :

price quantity

C1 8 3

C2 4 6

Then planned and target costs will be equal to the following value respectively :

planned = 83 + 46 = 48

target = 102+54 = 40

Am I right?

ajaycwa1981
Active Contributor
0 Kudos

Yes, you are right

But Plz note that target cost will depend on actual qty produced... In your example, the calculation of target cost is correct assuming your actual prod = expected production

target cost is simply pro-rated standard cost i.e. Std cost * actual output / standard output

Regards

Ajay M

Answers (0)