Asked by Blaudia Stephanie on Jun 08, 2024
Verified
Which of the following equations best describes target costing?
A) Selling Price - Desired Profit = Target Cost
B) Selling Price + Profit = Target Cost
C) Target Variable Cost + Contribution Margin = Selling Price
D) Selling Price = Profit - Target Variable Cost
Target Costing
A pricing method that involves reverse-engineering a product to meet a specific price point by targeting the total cost.
Full Cost
The complete cost of producing and delivering a product or service, including direct and indirect costs.
Profit Margin
A financial metric indicating the percentage of revenue that remains as profit after accounting for costs and expenses.
- Comprehend the principle of target costing.
Verified Answer
AS
Andrew StetlerJun 13, 2024
Final Answer :
A
Explanation :
Target costing is a pricing method used to determine the allowable amount for the cost of a product, so that a company can earn its desired profit margin. The formula for target costing is: Selling Price - Desired Profit = Target Cost. This formula helps a company to work backwards from the selling price, subtracting the desired profit to find out how much the product should cost to produce.
Learning Objectives
- Comprehend the principle of target costing.