ABSTRACT
Target costing is a technique to manage the profits of the firm. Value engineering is a systematic, interdisciplinary examination of factors affecting the cost of a product with the aim of devising a means to achieve its specified purpose at the required standards of quality and reliability and at an acceptable cost. Three major areas in the target costing process: price-driven costing, product-level target costing, and component-level target costing were identified. Top management begins the target costing process by setting the long-term sales and profit objectives of the firm. The process of target costing begins when a product is conceptualized and ends when it is released for mass production. Target costing identifies the costs at which products must be manufactured if they are to earn the desired level of profits. Once the product-level target costs are set, value engineering can be used to find ways to design the products so that they can be manufactured at their target costs.
