Both target costing and the percentage of sales method fail to consider the causal relationship between target sales and the marketing budget.

Question

Quizplus · Accepted Answer

Both target costing and the percentage of sales method only consider a desired profit margin and allocate costs accordingly, without taking into account the impact of the marketing budget on driving sales. Therefore, they do not fully consider the causal relationship between target sales and the marketing budget.

Both Target Costing and the Percentage of Sales Method Fail