The idea of target costing, originally promoted in Japan, is about going upstream to achieve cost reduction. Target costing is not really a method of costing, but it is a technique used in cost management. The objective of target costing is to engineer in targets for a product’s selling price, profitability, schedule and life-cycle costs concurrently with the planning and design of the product’s features and its build process. The target cost is maximum allowable cost a particular point of time and is specified by reference to the successive stages in a product’s life cycle. The important feature of target costing is its market orientation i.e. it involves ascertaining of product cost beforehand by working back from an expected future market price. A target market price is determined by marketing department prior to designing and introducing a new product into the market. This target price is set a level that will permit the company to achieve a desired market share and sales volume. A desired profit margin is then deducted to determine the target maximum allowable product cost. Target costs usually incorporate learning effects over time.