The long term financial success of any business depends on whether its prices exceed its costs by enough to finance growth, provide for reinvestment, and yield a satisfactory return to its stakeholders. As competition increases, and supply exceeds demand, market forces influence prices significantly more. To achieve a sufficient margin over its costs, a company must manage those costs relative to the prices the market allows or the price the firm sets to achieve certain market penetration objectives. In the context of these characteristics, the practice of target costing has evolved.
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