Target costing sets prices by computing an average cost then adding a desired markup.

Question

Quizplus · Accepted Answer

Target costing sets prices by first analyzing the customer's perceived value of the product and then subtracting a desired profit margin to determine a target cost. The focus is on cost reduction and efficient production to achieve the target cost while maintaining the desired profit margin, rather than adding a markup to the average cost.

Target Costing Sets Prices by Computing an Average Cost Then