What determines the cost of a product or service on the basis of the price that customers are willing to pay?
A) target costing
B) product costing
C) relevant costing
D) differential costing

Question

Quizplus · Accepted Answer

Target costing involves determining the cost of a product or service based on the price that customers are willing to pay for it. This allows the company to set a target cost that will enable them to earn a desired profit margin. By focusing on customer demand and setting a target cost, the company can make strategic decisions about product design, sourcing, and production processes to achieve the desired cost and price point. Product costing, relevant costing, and differential costing are all accounting techniques used to determine the cost of a product or service, but they do not necessarily take into account customer demand and pricing considerations.

What Determines the Cost of a Product or Service on the Basis