Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 40

The market price for a product has been $50 per unit, but competitive pressures have reduced the market price to $45. The firm manufactures 10,000 of these products per year at a manufacturing cost of $38 per unit (including $22 fixed cost and $16 variable cost per unit). Other selling and administrative costs for the product are $8 per unit. What is the firm’s target cost for this product?

Step 1 of 3

“The target costing is a technique where firms ascertain a realistic price to be charged for products at lower cost.

It thus helps the company by generating higher profits in competitive situations.”