If David adopts the approach known as target costing, the company will first need to know how their competitors price their product. When a company wants to use target costing, after determining what a competitor sets its product price at, the will subtract the margin they would like to receive from the product to see what their target cost of the product should be. Target costing is a way for a company to appropriately determine the cost of the product in all aspects based on functionality and quality.
