When using a target costing approach, the company starts with revenue at market price, and then subtracts its desired profit, to yield the target total cost.

Question

Quizplus · Accepted Answer

This is the basic principle of target costing, where the company first determines the price it can sell the product for in the market and then subtracts the desired profit margin to arrive at the target cost.

When Using a Target Costing Approach, the Company Starts with Revenue