Organizations are subjected to a continuous pressure in order to reduce the cost of the
products or services they trade. It is extremely useful to understand the tasks or activities
(such as the assembly and calibration of equipment or product distribution) that lead to the
appearance of costs in order to calculate and manage the product costs. For the purposes of
establishing the cost reduction objectives, managers start by “scanning” the market in order
to determine the prices that the customers are willing to pay for certain products or services
(these prices are considered target-prices and are fixed at a level that will enable the company
to get the desired market segment and the proposed sales volume). In order to reach the
target cost, the managers deduct from this target price a profit margin corresponding to the
operation cycle that they expect to obtain throughout the entire lifecycle of the product or
service. Then, the managers try to obtain the target cost by eliminating certain activities
(such as product reconditioning) and the reduction of the costs for the execution of activities