Which equation better describes target costing?
A)Selling Price - Desired Profit = Target Costs
B)Selling Price - Target Costs = Profit
C)Target Variable Costs + Contribution Margin = Selling Price
D)Selling Price = Target Variable Costs + Target Fixed Costs + Profit

Question

Quizplus · Accepted Answer

Target costing is a method of determining the maximum cost to be incurred on a product, based on the price at which it will be sold and the desired profit margin. The formula for target costing is Selling Price - Desired Profit = Target Costs, which indicates that the goal is to determine the target cost by subtracting the desired profit margin from the selling price.

Which Equation Better Describes Target Costing