When target costing is used,the target cost is determined by:
A)finding the difference between the market price and the amount of profit needed to satisfy stakeholders.
B)adding the cost of direct materials,direct labor,and activity costs of a product.
C)subtracting all nonvalue-added costs from total manufacturing costs of a product.
D)adding the manufacturing and nonmanufacturing costs of the product.

Question

Quizplus · Accepted Answer

Target costing involves determining the target cost by finding the difference between the market price or competitors' prices and the amount of profit needed to satisfy stakeholders. This approach ensures the product is priced competitively while generating profits for the company. Option B is incorrect because it only considers the cost of production, not the market price or profit needs. Option C is incorrect because nonvalue-added costs may still be necessary for the production process. Option D is incorrect because it doesn't take into account the market price or profit needs.

When Target Costing Is Used,the Target Cost Is Determined By