What is the major difference between cost-based and target costing (demand-based pricing)? Multiple choice question. Cost-based pricing is based on fixed manufacturing expenses. Target costing is based on variable expenses. Cost-based pricing takes market forces into account as well as manufacturing expenses. Target costing is chiefly focused on the pricing policies of competitors. Cost-based pricing starts with the expense of making a product and adds profit. Target costing starts with the desired price and attempts to lower expenses to meet that price