Target costing starts with: the selling price of an organization's end product minus the operating profit to establish the target cost. the buyer's lowest reasonable price target, and works to a negotiated price agreed on by the buyer and the supplier. the supplier's price, and works to determine the supplier's true cost structure. the supplier's price, and works to determine the selling price of the buying organization's end product or service. the selling price of an organization's end product minus actual manufacturing, overhead, and materials costs to determine operating profit.

the selling price of an organization's end product minus the operating profit to establish the target cost.

From the sales price and gain we stabliosh the maximum cost for the product. We must optimize our purchases strategy and manufacturing processto allow this cost to be possible.

Explanation:

the supplier's price, and works to determine the supplier's true cost structure.

the supplier's price, and works to determine the selling price of the buying organization's end product or service.

If we start from the supplier price, we are going to end up doing a markup from cost which is the traditional method

The buyer's lowest reasonable price target, and works to a negotiated price agreed on by the buyer and the supplier.

We cannot bargain with the "buyer" unless we face a monopoly or monopsony else; it will be a lot of potential consumers and negociate with all of them is not viable. Also there is no target cost from this option.

the selling price of an organization's end product minus actual manufacturing, overhead, and materials costs to determine operating profit.

Then, there is no target; we subtract our cost and what is left is operating profit there is no pressure to optimize or improve our ways.