Which of the following is the correct formula to calculate the target cost?
A)Target Cost = Target Sales Price + Desired Net Profit
B)Target Cost = Target Sales Price - Desired Net Profit
C)Target Cost = Target Sales Price
D)Target Cost = Desired Net Profit + Research and Development Expenses

Question

Quizplus · Accepted Answer

The correct formula to calculate the target cost is to subtract the desired net profit from the target sales price. This is because the target cost is the cost at which the product must be produced in order to achieve the desired profit margin at the given sales price. Therefore, the formula is Target Cost = Target Sales Price - Desired Net Profit.

Which of the Following Is the Correct Formula to Calculate