Which of the following statements is characteristic of target costing?
A)It is a useful tool for establishing cost reduction goals for products in the design stage.
B)It is the difference between the sales price needed to capture a predetermined market share and the desired per-unit gross profit.
C)Target costs are internally driven.
D)The principal challenge of target costing is finding the cause of the costs.

Question

Quizplus · Accepted Answer

Target costing is a cost management tool used in the design stage to set cost reduction targets to meet a predetermined market price. It uses market research to determine the price customers are willing to pay, and then works backward to set the cost target. Internal cost factors are used to determine the feasibility of the target cost. Therefore, option A is the correct statement. Option B describes the concept of target profit, not target costing. Option C is incorrect because target costs are market-driven, not internally driven. Option D is incorrect because finding the cause of costs is not the main challenge of target costing.

Which of the Following Statements Is Characteristic of Target Costing