The process that determines an allowable product cost while setting market price and allowing for an acceptable profit margin is known as
A)target costing.
B)product life cycle costing.
C)activity-based costing.
D)responsibility costing.

Question

Quizplus · Accepted Answer

Target costing is a process that determines the allowable cost of a specific product based on the price it can sell for and a desired profit margin. It involves analyzing the market demand and setting the price of the product accordingly, then working backwards to determine the costs that must be incurred in order to make a profit at that price point. This approach helps companies prioritize the features and functions of their products based on customer needs and allows them to meet those needs at a lower cost. Product life cycle costing and activity-based costing are also costing methods, but they do not specifically address the process of setting prices and profit margins. Responsibility costing is a method of assigning costs to specific departments or individuals within an organization.

The Process That Determines an Allowable Product Cost While Setting