Difference between 'target costing' and 'standard costing'

[Yenen]

Business English Lesson, Advanced Level

ESL/EFL Test #219 "Price-based or Target Costing", question 2

Product selling price is ......... by the marketplace and is determined by analysis along the entire industry value chain and across all functions in a firm.

(a) constrained
(b) contained
(c) restrained
(d) retained

Business English Lesson, Advanced Level

ESL/EFL Test #219 "Price-based or Target Costing", answer 2

Product selling price is constrained by the marketplace and is determined by analysis along the entire industry value chain and across all functions in a firm.

Correct answer: (a) constrained
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Difference between target costing & standard costing?

Yenen

[Mister Micawber]

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Standard costing is used mainly in mass production as a tool for control. Costs for standard parts are established by work study or experience, actual costs then being checked against the standard costs. (MoneyGlossary.com)

Target costing is a reversed cost accounting technique. Instead of calculating costs first and then setting the price based on these calculated costs, target costing does it the other way around. Target costing is convenient for firms operating in perfect competition. The steps in target costing are as follows: 1. Determine the price consumer is willing to pay for the product, say $Z. This may be arrived at after conducting a market research; 2. Determine the profit margin the business is willing to accept, say X% of Z; 3. On subtracting the above two, i.e., $Z minus (X% of Z), Target cost is determined. (Wikipedia)
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Native English teacher at Mister Micawber's