Work backwards from your selling price and target margin to calculate the maximum amount you can spend producing or purchasing a product. All calculations are completed securely in your browser and are not sent to our servers.
Explore free calculators, templates and practical tools built to help food businesses understand pricing, profitability, forecasting and day-to-day operations.
A target cost is the maximum amount a business can spend producing or purchasing a product while still achieving its desired margin at the intended selling price.
A target cost calculator works backwards from a selling price and target margin to calculate the maximum allowable product cost.
Enter the intended selling price, select the relevant sales channels and enter the required margin at each stage. The calculator works backwards through the channel structure to determine the maximum product cost that can support those prices and margins.
Target cost is calculated by multiplying the selling price by one minus the desired margin percentage. For example, a product selling for $15 with a target margin of 30% has a maximum target cost of $10.50.
Target costing helps determine whether a product can be produced or sourced profitably before committing to ingredients, packaging, suppliers or manufacturing arrangements.
Yes. The calculator can work backwards through retail, wholesale and distributor channels to calculate the maximum starting cost while allowing each stage to achieve its required margin.
Each additional channel generally needs to earn its own margin. When distributors and wholesalers sit between the producer and the retailer, less of the final retail price remains available to cover the original product cost.
Target cost is the maximum cost permitted by the intended selling price and margin. Actual cost is what the product currently costs to produce or purchase. Comparing the two shows whether the proposed product or pricing model is commercially viable.
The target cost should account for the direct costs relevant to one saleable unit. This may include ingredients, packaging, direct production labour, inbound freight, duties and other landed costs.
The calculation depends on the values entered. For commercial margin calculations, use GST-exclusive prices and costs throughout. GST can then be added to the final selling price where required.
If actual cost is higher than target cost, the product will not achieve the desired margin at the entered selling price. You may need to reduce costs, increase the selling price, lower the target margin or change the route to market.
Yes. Target costing can establish a cost limit before recipes, packaging, suppliers and production methods are finalised, helping the product development team make commercially informed decisions.
Yes. The calculated target cost provides a clear maximum purchase price that can be compared with supplier quotes and minimum-order requirements.
No. Meeting the target cost supports the entered gross margin, but overall profitability also depends on sales volume, discounts, waste, overheads, commissions, marketing and other operating expenses.
The calculator is designed for food and beverage manufacturers, product developers, brands, wholesalers, distributors and retailers evaluating product costs and channel pricing.
No. Calculations are completed locally within your browser, and the values entered into the calculator are not sent to Supply'd servers.
Supply'd ERP connects supplier pricing, landed costs, recipes, packaging, labour and production information to provide current product costing and margin visibility. These costs can be compared with commercial pricing targets when reviewing product profitability.
