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I watched your lecture but I couldn’t understand the difference between target cost and estimated actual cost and why do we compare both of them?
The target cost is the maximum cost that we need to have in order to achieve our objective (such as a specific % gross profit).
The ‘actual’ cost is the what we expect the cost will actually be.
If the expected actual cost is higher than the target cost then we need to find ways of reducing whatever we expect the actual cost will be down to the target.
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