Which of the following statements describes target costing?
A) It generally computes the target cost to be higher than the full product cost of the product or service.
B) It starts with the target sales price and subtracts desired profit to attain the target cost.
C) It is based on traditional cost-based pricing.
D) It starts with the target cost and adds desired profit to attain the target sales price.

Question

Quizplus · Accepted Answer

Target costing begins with determining the target sales price that customers are willing to pay, then subtracts the company's desired profit margin to find the target cost. This approach is used to ensure that a product can be produced at a cost that ensures profitability while meeting market price expectations.

Which of the Following Statements Describes Target Costing