Asked by Andrew Cameron on Jun 17, 2024
Verified
Target costing starts with:
A) the selling price of an organization's end product minus the operating profit to establish the target cost.
B) the supplier's price,and works to determine the selling price of the buying organization's end product or service.
C) the supplier's price,and works to determine the supplier's true cost structure.
D) the buyer's lowest reasonable price target,and works to a negotiated price agreed on by the buyer and the supplier.
E) the selling price of an organization's end product minus actual manufacturing,overhead,and materials costs to determine operating profit.
Target Costing
A pricing strategy in which a product’s selling price is set first based on market conditions, and then costs are managed to meet that price.
Operating Profit
The profit earned from a firm's core business operations, excluding deductions of taxes and interest.
Selling Price
The amount of money that a buyer pays to purchase a product or service from a seller.
- Grasp the concepts of target costing and its application in cost management.
Verified Answer
SC
Santa CastilloJun 20, 2024
Final Answer :
A
Explanation :
Target costing is a method of cost management that starts by determining the target cost of a product based on the selling price minus desired profit margin. In other words, it sets the maximum cost that can be incurred in order to achieve the desired profit margin. This approach is different from the traditional cost-plus pricing method, which starts with cost and adds a desired profit margin to determine price.
Learning Objectives
- Grasp the concepts of target costing and its application in cost management.
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