Which equation better describes target costing?
A) Selling price - Desired profit = Target costs
B) Selling price + Profit = Target costs
C) Target variable costs + Contribution margin = Selling price
D) Selling price = Profit - Target variable costs

Question

Quizplus · Accepted Answer

Target costing is a cost management system that involves determining the maximum cost a product can incur while maintaining its quality and functionality to meet customers' expectations. To achieve this, the company determines the selling price it desires to charge from the customers and then subtracts the desired profit from it to get the target cost. This formula is represented as Selling price - Desired profit = Target costs.

Which Equation Better Describes Target Costing