What is the basic premise of target costing?
A)Products should be designed to meet customer needs at a price customers are willing to pay that allows the company to make a reasonable profit.
B)Products should be designed at the least cost possible to enable the lowest price in the market.
C)Products should be designed based on features that competitors' products include to enhance the company's ability to compete more effectively.
D)The price with the highest profit should always be selected.

Question

Quizplus · Accepted Answer

Target costing is a method of determining the cost at which a product must be manufactured in order to make a desired profit. The basic premise of target costing is that a product should be designed to meet customer needs at a price customers are willing to pay that allows the company to make a reasonable profit. This means that the cost of the product must be managed throughout the design and development process to ensure that it stays within the target cost.

What Is the Basic Premise of Target Costing